Buy this chipmaker as AI demand boosts memory pricing, says RBC

Strong demand and pricing in memory chips could continue to support the outlook for Micron , according to RBC Capital Markets. The bank reiterated its outperform rating on the semiconductor manufacturer and hiked its price target to $525 from $425. This new forecast implies an upside of 23%. Analyst Srini Pajjuri said that he was raising his estimates significantly ahead of Micron’s next earnings report based on the company’s continued pricing strength, which could drive another strong beat. As contracts are renegotiated next year, Pajjuri expects that HBM, or high bandwidth memory, pricing will further increase. He believes that strength in artificial intelligence and data centers should continue to persist into 2028. “Data Center now accounts for over half of DRAM industry revenue, and we expect strong AI demand for HBM and [double data rate] to sustain through CY27,” he wrote. “Micron management recently indicated that HBM is soldout for CY26 and that HBM4 is on track for volume shipments in CQ1.” The analyst added that HBM content has increased significantly with each new generation of AI processors. “DDR content in AI servers is also increasing significantly on inferencing workloads and longer contexts. As such, we expect any demand destruction in PC/Smartphone markets to be more than offset by AI/Data Center demand,” Pajjuri wrote. “Similarly, NAND is benefiting from retrieval-augmented generation (RAG) and AgenticAI applications and we expect demand to continue to outpace supply through CY26.” For the overall memory industry, Pajjuri expects demand to continue outpacing supply growth through 2026 and into next year. The analyst thinks that Micron could maintain its current share in the HBM market, which went from zero to more than 20% in around eight quarters. The target increase comes as Micron announced plans to build a second manufacturing plant in Taiwan to bolster its DRAM production. Shares of Micron have surged 49% this year and close to 323% over the past 12 months.