Why is Micron stock surging 4% today

Micron Technology stock rose more than 4% in early trading on Tuesday, recovering from the previous session's decline.

The stock surged after KeyBanc raised its price target on the memory-chip maker, citing persistent supply shortages and expectations of continued price increases across memory markets.

MU stock gained about 4.6% to $980.34 after falling 4.3% on Monday during a broader semiconductor sector selloff.

KeyBanc analyst John Vinh increased his price target on Micron to $1,750 from $1,600 following a supply chain visit to Asia.

The new target implies approximately 87% upside from Monday's closing price of $937.

KeyBanc expects memory pricing to remain strong

Vinh said supply chain checks continue to indicate that memory markets will remain tight well into 2027.

He wrote, "Memory shortages remain persistent…Supply chain commentary continues to point to a tight memory environment through 2027."

The analyst expects dynamic random-access memory (DRAM) prices to rise between 15% and 20% in the third quarter compared with the previous quarter, followed by another 15% increase in the fourth quarter.

For NAND flash memory, KeyBanc forecasts prices to increase 30% to 40% in the third quarter and another 15% in the fourth quarter.

Vinh also expects high-bandwidth memory (HBM), the specialized memory used in advanced artificial intelligence processors, to more than double in price next year.

His valuation is based on a price-to-earnings multiple of nine times his projected fiscal 2027 earnings for Micron.

AI demand and long-term agreements support outlook

Micron continues to benefit from rising demand for memory used in artificial intelligence infrastructure, particularly HBM, which is widely deployed alongside advanced AI graphics processing units.

During the company's latest earnings call, Chief Executive Officer Sanjay Mehrotra said demand continues to outpace supply.

He stated that demand for DRAM and NAND chips continues to exceed supply and the company "expects tight conditions to persist beyond calendar 2027."

The company has also secured 16 long-term supply agreements with major customers, providing greater revenue visibility while helping improve production planning.

In addition to HBM, Micron continues to see healthy demand for data-center DRAM products and enterprise solid-state drives.

Wall Street remains bullish despite recent volatility

Memory-chip stocks have experienced heightened volatility after posting substantial gains during the artificial intelligence investment boom.

Despite recent weakness, analysts remain largely positive on Micron's outlook.

89% of the 45 analysts who issued ratings in July recommend buying or strongly buying the stock, while none recommend selling.

FactSet data shows the average Wall Street price target stands at approximately $1,579.

Despite the rally over the past year, the stock remains about 21% below its 52-week high of $1,255.

It currently trades at a forward 12-month price-to-earnings multiple of 6.58, below its one-year high valuation of 17.01.