Micron can meet only 50% to 75% of customer demand as DRAM becomes a strategic asset for AI systems.
Micron’s stock is leading the market right now for one clear reason: AI demand has changed the value of memory, and investors are finally reacting.
Over the past 12 months, Micron stock has surged by 237%, putting it ahead of nearly every large-cap tech name.
UBS turned bullish on Micron this week when it repeated its buy rating on Micron and raised its price target to $400 from $300, which is a 16% rally from the price as of Tuesday’s close.
UBS analyst Timothy Arcuri said in a note on Monday that their revision is thanks mainly to all those investor meetings with Micron management, where executives said they believe the current memory cycle will last longer than past ones.
“We still believe investors are underappreciating the degree to which AI has fundamentally made memory, DRAM in particular, a more strategic asset,” Timothy wrote.
Timothy said supply remains constrained. According to UBS, Micron is currently able to meet only 50% to 75% of demand from its largest customers. He said AI workloads have forced customers to stop treating memory like a low-cost commodity. Memory is now seen as a strategic input, which has changed how companies plan purchases and secure long-term supply.
“Severe supply shortages supportive of an extended and durable memory upcycle,” Timothy wrote.
He also said the pricing setup has changed. In the pre-AI period, memory suppliers earned little extra for higher performance products because memory was just another system part. That is no longer the case.
“Suppliers are now getting paid for best-in-class performance as memory has become a key differentiator within hardware systems,” Timothy wrote, pointing to Nvidia’s Blackwell and Blackwell Ultra platforms.
He added that DRAM content growth inside AI servers is still not fully priced in by the market. Micron believes DRAM offers better value than NAND because it allows more customization and higher product quality.
The stock’s strength has also drawn attention in the options market. Most short-dated options expire worthless and lose value fast due to time decay. Many traders sell these options to capture that decay, but that strategy comes with short gamma risk, meaning sharp price swings can hit profits quickly. Longer-dated buy-writes and defined-risk call-spread risk reversals reduce that exposure, especially in stocks with high long-term implied volatility.
We took a look at a 2025 situation to explain this setup, specifically when Nvidia surged by just over 30% from January 3, 2025, to January 2, 2026.
A long-dated call spread risk reversal tied to Nvidia slightly lagged the stock but showed much lower volatility, per data from Bloomberg Terminal.
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