Micron to invest up to $3B in the US chip supply chain, stock jumps on AI optimism

Micron Technology shares surged 6% in premarket trading on Thursday after the memory-chip maker announced plans to invest up to $3 billion to strengthen the US semiconductor supply chain.

The bullish analyst commentary and improving sentiment toward AI-related memory demand further supported the stock.

Micron announces $3 billion US supply chain investment

Micron Technology said it plans to invest up to $3 billion to expand the US semiconductor supply-chain ecosystem and support the manufacturing footprint needed for future technology innovation.

"The investment reflects Micron's commitment to securing a reliable US supply of critical manufacturing materials, enhancing supply assurance, improving long-term planning flexibility, and supporting the growing demand for advanced memory and storage solutions driven by artificial intelligence and other data-intensive applications", the company said in its press release.

As part of the initiative, Micron will provide GlobalWafers Co., Ltd. with $500 million in strategic financing to help expand the company's GlobalWafers America 300mm raw silicon wafer manufacturing facility in Sherman, Texas.

The companies also plan to enter into a 10-year supply agreement that will give Micron access to significant raw silicon wafer capacity to support its long-term manufacturing plans and strengthen the US semiconductor manufacturing ecosystem.

Beyond the manufacturing expansion, Micron and GlobalWafers said they intend to explore collaboration on next-generation wafer technologies and process innovations to support future semiconductor manufacturing requirements.

Stock rebounds as Asian chipmakers recover

Micron shares rose 6% in premarket trading on Thursday, extending a rebound that followed gains by South Korean memory-chip makers Samsung and SK Hynix during the Asian trading session.

The recovery comes after Micron's stock had retreated from levels above $1,200 in late June as investors grew concerned about whether the pace of artificial intelligence spending that has fueled demand for memory chips could be sustained.

Sentiment appeared to improve after SK Hynix climbed more than 5% in local trading on Wednesday, helping lift confidence across the memory-chip sector.

Analysts remain positive on AI-driven memory demand

Bank of America analyst Vivek Arya reiterated a Buy rating on Micron and maintained a price target of $1,550.

Arya said global cloud and AI infrastructure spending could reach $1.5 trillion by 2027, with between 35% and 40% of that spending directed toward memory components.

He argued that investors are underestimating the shift in memory from a highly cyclical product to a strategic component of AI infrastructure.

Arya's $1,550 price target is based on a sum-of-the-parts valuation.

It values Micron's traditional cyclical memory business at around three times its expected 2028 book value while assigning its high-bandwidth memory business a price-to-earnings multiple of 31 times forecast 2028 earnings.

UBS also maintained a positive view on the memory market.

The brokerage raised its forecast for DRAM contract prices, projecting DDR prices to increase 32% quarter on quarter in the third quarter, up from its previous estimate of 17%.

The stronger pricing outlook adds to expectations that demand for memory products will remain supported as AI infrastructure investments continue, even after recent concerns over the sustainability of AI-related spending weighed on semiconductor stocks.