Supply shortages are expected to persist through 2026, with the logic of "rising prices and volumes" for storage chips reinforced. Morgan Stanley reiterates Micron (MU.US) "Overweight" rating.

Bloomberg News has learned that due to ongoing supply shortages, Morgan Stanley has raised its earnings forecasts and target prices for memory chip manufacturer MU.US. The bank reaffirmed its “Overweight” rating on Micron and increased its target price from $350 to $450.

Analyst Joseph Moore wrote in a client report, “Despite numerous changes in the DRAM sector over the past 12 months, we remain optimistic about the future. With another round of significant price increases in the first quarter and signs that supply growth in 2026 will hardly alleviate the severe shortages we anticipate, we expect prices to rise further this year. Spot prices for DDR5 have increased by 30% since the beginning of the year and are currently over 130% higher than January contracts (up 86% since December). This means that even if mainstream prices double again, they will still be more than 10% below spot prices—which are still rising. Additionally, we are confident that mainstream prices could approach an average selling price of a few dollars per GB, as we see buyers who did not lock in prices early are already paying close to that level.”

Looking deeper, Moore believes Micron’s earnings per share could reach as high as $52 in 2026, largely driven by high-bandwidth memory and strong demand from Nvidia.

“HBM is undoubtedly a key part of this story. The market needs to stay healthy to justify investors paying higher valuations for ‘higher highs and higher lows,’” Moore added. “However, DDR5 prices have already risen to levels that make the market more attractive. Therefore, despite ongoing concerns about Micron’s position in HBM4, we do not expect any negative impact on profitability.”

Regarding the recent decline in the stock, Moore said it is difficult to pinpoint what triggered the recent worries, although he expects SK Hynix to secure most of Nvidia’s early Rubin architecture orders. If Micron encounters any unexpected issues in ramping up HBM4 production, HBM3e will still hold the majority of the market share.

Micron stated at an investor conference on Wednesday that there have been some “inaccurate reports” regarding high-bandwidth memory. The company is already mass-producing HBM4 and has begun shipping to customers. Additionally, Micron’s HBM supply for the 2026 fiscal year has been sold out, with yields meeting expectations.