The Physical Layer

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Research · Initiation · 7 October 2026

Micron Nasdaq: MU

Micron's wafers are still short, but at US$1,046 the price needs the next normal year to earn like the last peak.

The call No call
Price at publication
US$1,045.56close, 6 October 2026
Target
Noneno position at this price
Conviction
Low

What would prove the thesis wrongBy October 2027, Micron reports a quarter in which DRAM prices and total revenue both fall on the quarter before, which says the up-cycle is ending early and points to my bear case; or it says strategic customer agreements with a defined pricing framework cover at least half of its revenue through 2030 while it still expects the industry to be supply constrained in calendar 2028, which lifts normal earnings towards my bull case.

What would turn this into a callA price at or below about US$726, which points long, or at or above about US$1,114, which points short, with my numbers unchanged.

Read the full notePDF, 6 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves

The call in brief

  1. Micron makes DRAM, including HBM, the stacked memory beside AI chips, and NAND flash. Fiscal 2026, the year to 3 September, brought US$133.2 billion of revenue, 3.6 times the year before, and a non-GAAP gross margin of 81 per cent. It guides US$61.5 billion for the quarter to November alone.
  2. The evidence since the piece supports both halves. Micron sold the vast majority of its calendar 2027 HBM before the year starts, and still puts the trade ratio at three to one or more. Its cloud unit, which carries HBM, held an 83 per cent gross margin while the other units rose to as much as 90 per cent, consistent with the piece.
  3. At US$1,045.56 the shares trade at 5.9 times consensus fiscal 2027 earnings and 5.1 times fiscal 2028. That looks cheap, but memory earnings are cyclical. On my method the price needs a normal year after the shortage to earn about US$59 a share, a net margin near 45 per cent, close to the 46.5 per cent of the 2018 peak.
  4. My call is no call, with low conviction. I take a normal year at a 30 per cent net margin, well above the 18.8 per cent of the last ten years, which gives a base value of US$835, 20 per cent below the price, within a range of US$436 to US$1,409.