Micron Technology (NASDAQ: MU) shares slipped more than 1.8% on Friday, pressured by a combination of fresh capacity expansion plans from rival SK Hynix and a cautious note from Citi that trimmed its price target on the memory chipmaker. The stock has retreated roughly 9% over the past month, though it remains up more than 660% over the last 12 months.
SK Hynix's massive investment adds to supply concerns
Investor sentiment was dampened after SK Hynix announced that its board had approved a 54.3 trillion won ($38.15 billion) investment to build new chip fabrication facilities in South Korea. This follows even larger commitments made earlier this year, when SK Hynix and Samsung said they would jointly invest 800 trillion won ($518.58 billion) to construct semiconductor manufacturing hubs in the southwest of the country.
However, the additional supply is not expected to hit the market soon. Large semiconductor fabs typically take years to construct. Micron's own $100 billion manufacturing project in New York, announced in 2022, is not slated to begin production until 2030. Industry-wide, no major new memory capacity is expected to come online until roughly next year, with further additions planned for 2028.
Citi cuts price target on softer memory pricing outlook
Citi lowered its price target on Micron to $1,150 from $1,400 while maintaining a Buy rating. The revision reflects a more moderate outlook for DRAM and NAND pricing over the coming quarters. The bank reduced its valuation multiple to 8 times revised calendar-year 2027 earnings estimates, down from 10 times previously.
"We trim MU TP to $1,150 from $1,400 based on 8x P/E vs prior 10x times revised C27 EPS to reflect lower market multiples on mixed memory peer results," the Citi analyst wrote. The adjustment followed meetings with memory supply chain participants and third-party experts during the "Future of Memory and Storage" conference.
Citi now expects DRAM prices to decline 3% in the second half of 2027, compared with its previous expectation for flat pricing. NAND prices are projected to fall 5% during the same period. The firm also reduced its fiscal 2027 and 2028 earnings estimates by 1% and 2%, respectively.
"We expect Micron's gross margins to decline from current mid-80s and sustain in mid-70s next year as prices decline from a high base with ~40% DRAM bits under LTA pricing contracts," the analyst added.
China expansion remains a longer-term concern
Beyond near-term pricing, Citi identified expanding Chinese memory production as its biggest structural concern. "China competition and capacity additions in both NAND and DRAM markets is the biggest risk to our thesis," the analysts said.
According to Citi, China's leading NAND producer YMTC plans to add 50,000 to 60,000 wafer starts next year to its existing 200,000-unit capacity, with a goal of becoming the world's largest NAND manufacturer by 2030. DRAM producer CXMT also intends to expand production from roughly 350,000 wafers to around 400,000 next year, targeting approximately 600,000 wafers by 2030, though Citi noted that yields remain low.
While US export restrictions limit Chinese-made memory sales into the United States, Citi warned that competition could still affect Micron internationally. "While US government is unlikely to allow made in China memory sales to US, sales to data centers in other regions like Europe could indirectly impact Micron," analysts wrote.
Investors have been closely watching the memory market, especially as AI-driven demand continues to support the sector. However, recent soft guidance from SanDisk and CXMT's strong debut have added to concerns about oversupply and competition.
This article is for informational purposes only and does not constitute financial advice.
