Banking giant UBS believes that a surging memory name will soar to a nearly $2 trillion valuation in the coming months amid massive demand from the AI buildout.
The News
In a new investor note, UBS analyst Timothy Arcuri predicts that Micron Technology (MU) will soar to as high as $1,635, implying an over 80% increase from its current price of $895, reports Bloomberg.
“We believe the market will start to put a more ‘normal’ multiple on the stock and MU will continue to re-rate higher as more details emerge about the structural changes AI has driven to the entire memory complex.”
Arcuri’s new forecast is three times the bank’s initial call of $535 for MU, indicating that the company will be valued at around $1.8 trillion by next year. According to the analyst, the hyperscalers are willing to spend more money if they can reduce the risk of AI memory supply constraints.
“Hyperscalers appear increasingly willing to exchange pricing for multi-year supply visibility and greater predictability around future deployment economics.”
What It Means for Investors
Micron manufactures High Bandwidth Memory (HBM), which is specifically designed to power the next phase of generative AI advancement: inference. In the past, Nvidia (NVDA) graphics processing units were used to train AI models using vast amounts of data. The demand for GPUs propelled Nvidia to a $5.204 trillion market cap, making it the world’s most valuable company.
But in July, Microsoft released a report highlighting that hyperscalers have mostly exhausted the easily accessible, high-quality public text on the open internet, hitting a phase called the “Data Wall.” With most of the available data consumed, AI labs are leaning more on inference, using more compute at the time of query to help models reason, test and generate stronger answers from what they have already learned.
Inference is a memory-hungry process, as GPUs have to pull huge amounts of data from memory in order to reason, test and generate answers. Micron’s HBM3E aims to address the memory bottleneck by delivering more memory bandwidth per stack, while giving GPUs more memory capacity and consuming 30% less power than competitors.
In short, Micron’s chips deliver speed, capacity and power efficiency, all of which are ideal for AI inference.
Big investment funds appear to be in the midst of capturing Micron’s upside potential. In Q1 of this year, Ray Dalio’s Bridgewater increased its stake in Micron by 66%, adding 586,064 MU shares to bring its total holdings to 1,475,704 shares worth $498.551 million.
And It’s not just Bridgewater. Paul Tudor Jones also splurged over $120 million to open a new position in MU last quarter.
While it remains to be seen whether MU can climb to UBS’s price target, institutional investors are already getting exposure, believing Micron is one of the companies holding the answer to address the memory chip bottleneck.
Photo by Igor Omilaev on Unsplash
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