Summit Research Sees Micron Doubling; Hyperscale Clients Might Consider Investing

In a report published Friday, Summit Research analyst Dr. Srini Sundararajan and his team looked into the emerging DRAM shortage anticipated for the second half of the year and considered the option of a hyper-scale client investing equity in Micron Technology, Inc. MU stock.

The prospects for a DRAM shortage in the second half of the year and beyond are increasing significantly as demand recuperates after a weak second quarter. This leads Summit Research’s analysts to feel that "it makes sense for hyperscale clients to nurture at least one non-South Korea-based DRAM vendor," as South Korean manufacturers face both seismic and conflict related fears.

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DRAM Shortage In Context

Put simply, in the midst of an overall DRAM shortage and given elevated demand for server DRAM, "it is but likely that going forward, server DRAM capacity might have to be reserved, similar to mobile DRAM being made to order," the report noted. Hence, the analysts believe hyperscale Micron clients like Google Inc GOOGL GOOG, Apple Inc. AAPL or Amazon.com, Inc. AMZN, among others, "might have to show increased commitment and incentivize MU to make server DRAM that may be optimized for their particular needs."

Related Link: Drexel Hamilton Shows Concern On DRAM Pricing, Downgrades Micron To Sell

Therefore, they think the likeliness of these hyperscale clients investing in Micron’s equity is quite high. While they estimate a potential stake could comprise less than 10 percent of the company’s stock, they still feel this would be a considerably bullish move for Micron’s stock.

On this possible stake and a few other reasons, Summit Research maintains a Buy rating and a $50 price target on shares of Micron.

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