Micron drops 6.3% on warning of memory-price peak by mid-2026

Micron Technology shares fell 6.3% on Thursday after Raymond James warned that memory-chip prices will peak by mid-2026, with back-to-back quarterly declines beginning early next year.

"We expect DRAM and NAND average selling prices will peak in mid-CY26," Karl Ackerman, an analyst at Raymond James, said in a research note Wednesday.

The warning comes as Chinese manufacturers ChangXin Memory Technologies and Yangtze Memory Technologies ramp production, adding supply to a market already straining under soaring prices. Global smartphone shipments are forecast to fall about 14% this year, according to Counterpoint Research, as high memory costs push handset makers to reduce consumption. Nine U.S. trade associations sent an open letter Wednesday to Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick urging measures to ease the memory-chip shortage.

A peak in memory prices typically signals the start of a downturn in the industry's boom-and-bust cycle. Ackerman maintained his Outperform rating on Micron, arguing that long-term supply agreements between chipmakers and customers should cushion the correction this time.

Supply Ramp and Demand Softening Create a Two-Sided Squeeze

On the supply side, CXMT and YMTC are adding capacity to the DRAM and NAND markets, threatening the supply discipline that has supported elevated prices. CXMT, China's leading DRAM producer, has been expanding its fabrication capacity, while YMTC is increasing output of 3D NAND flash memory. Both companies have benefited from Chinese government support aimed at reducing dependence on foreign chip suppliers.

On the demand side, AI's appetite for high-bandwidth memory — the advanced DRAM used in Nvidia and AMD graphics processors — has pushed component costs so high that other industries are cutting back. The smartphone market, a major consumer of both DRAM and NAND, is expected to shrink 14% this year, Counterpoint data show. Handset makers are facing higher bill-of-materials costs, squeezing margins in a market already under pressure from lengthening replacement cycles.

The trade association letter highlights the breadth of the impact. "While recent developments in AI offer the promise of generational technological advances and are important for U.S. tech leadership, we must also ensure other key industries are not negatively impacted," the groups wrote.

Valuation Signals Market Is Pricing In the Slowdown

Micron's forward price-to-earnings ratio has expanded to 11.7 times, according to FactSet, from 4.4 times as recently as April. For a stock that normally trades at a low multiple because of the cyclical nature of memory chips, the expansion reflects investor anticipation of moderating growth.

"We believe this multiple implies moderating contract ASP growth, margin degradation, and oversupply conditions looming in the next one to two years," Ackerman said.

South Korean peers SK Hynix fell 2.6% and Samsung Electronics dropped 2.5% in sympathy, as the selloff spread across the memory sector. SK Hynix, the dominant supplier of HBM to Nvidia, has been the biggest beneficiary of the AI-driven memory boom, while Samsung has been slower to capture HBM market share.

Micron shares, up 916% over the past year, now trade at 11.7 times forward earnings — a multiple that already embeds a slowdown scenario. If long-term supply agreements hold and AI demand for HBM continues to grow, the downturn may prove shallower than historical cycles suggest. But with Chinese supply ramping and smartphone demand contracting, the margin of safety is narrowing. The next earnings report, expected in late June, will provide the next data point on whether the cycle has further to run or has already turned.

This article is for informational purposes only and does not constitute investment advice.