Micron's market value exceeds 800 billion dollars, Deutsche Bank raises target price to 1000 dollars

Deutsche Bank believes that the market still underestimates Micron's earnings resilience in the AI storage cycle. After organizing multiple investor communication meetings for Micron in Europe, the target price for Micron has been raised to $1,000. This target price corresponds to a price-to-earnings ratio of about 8 times the expected earnings per share for the fiscal year 2027, implying a total market value of around $1.1 trillion.

The core judgment is that AI is changing the highly cyclical operation of the storage industry in the past. In inferential AI and agent AI scenarios, models require longer context, more complex task chains, and higher output efficiency. Storage is no longer just a complementary component, but a key link affecting the performance of computational power and Token costs.

The growth on the demand side is not only concentrated on HBM (High Bandwidth Memory). The report mentions that multi-level storage such as DDR5, LPDDR, NAND, SSD will be more extensively utilized, and Micron's advantage lies in having a more comprehensive storage product portfolio that can cover different scenarios, from high-speed generation to long context retrieval.

On the supply side, there has not been a synchronized relaxation. Micron emphasized in the communication that after the slowdown of Moore's Law, the increase in bit density brought by process iteration has decreased, and the industry's effective bit shipment growth rate has dropped from the historical 13% to 17%, to the current mid-low level of 5% to 8%.

A greater constraint comes from the displacement of traditional DRAM production capacity by HBM. The report states that the opportunity cost of producing 1 bit of HBM3e is about three times that of traditional DRAM, and with the implementation of HBM4e, this ratio will rise to about four times. This means that the stronger the AI demand, the more likely it is that ordinary DRAM production capacity will be squeezed out.

The market is also paying attention to Micron's long-term contracts. Micron has landed its first 5-year long-term contract, and Deutsche Bank believes that such arrangements help to increase the visibility of performance and smooth the profit performance during future supply and demand fluctuations.

The downside risks listed by Deutsche Bank include the large-scale implementation of new capacities by industry peers, the decline of storage prices, the amount of storage equipped per single device failing to meet expectations, technological breakthroughs by Chinese manufacturers, supply chain shocks, technical bottlenecks, trade policies, and macroeconomic fluctuations.