Micron Technology Inc. (MU) shares rallied 12% on Tuesday, driven by a Bank of America analysis suggesting that the rise of low-cost, open-source Chinese artificial intelligence models could actually expand, rather than contract, demand for memory chips. The move comes as investors brace for a busy week of earnings from major tech firms, including Alphabet, which may provide further clarity on AI spending trends.
Open-Weight Models: A New Memory Demand Driver
In a research note published Monday, Bank of America analyst Vivek Arya reiterated a Buy rating on Micron with a price target of $1,550, implying roughly 79% upside from the prior close. The report coincided with the release of Moonshot AI's Kimi K3, a 2.8-trillion-parameter model described as the largest open-weight model ever built.
Arya argued that open-weight AI models create broader memory demand because each organization deploying the model must run it on its own hardware. Unlike closed models that operate from centralized data centers, open models require enterprises, governments, and cloud providers to install model weights locally. "Closed models consolidate memory demand; open models multiply it," Arya wrote.
Every download of an open-weight model generates an additional customer-side memory requirement that would not otherwise exist, according to the bank. Although Chinese AI companies are offering models at significantly lower prices—Kimi K3 charges $3 per million input tokens compared with $15 for Anthropic's Claude Opus 4.8, and some Chinese models are priced up to 350 times below Western competitors—Bank of America said lower pricing reflects business strategy rather than lower hardware requirements.
The report estimated that running Kimi K3 still requires about 1.4 terabytes of high-bandwidth memory spread across at least 64 AI accelerators. "Open LLMs such as Kimi K3 pose no threats to memory demand," Arya noted. "They require the same or more memory as their model weights and active parameters increase."
China Competition and Buyback Outlook
Bank of America also addressed concerns about growing competition from Chinese memory manufacturers. The firm noted that ChangXin Memory Technologies is expanding production but currently competes primarily in commodity DRAM rather than advanced HBM3E and HBM4 memory used in AI systems. It also highlighted uncertainty over whether US equipment suppliers will receive approval to sell into the Chinese company.
Beyond AI demand, the bank pointed to another potential catalyst for Micron shares: the expected expiration of restrictions on Micron's share repurchases under the CHIPS Act around December 2026. Arya estimated Micron could generate between $120 billion and $130 billion in annual free cash flow over the next several years. Under a hypothetical 40% payout policy, that could translate into annual share repurchases of $50 billion to $60 billion, or roughly 5% to 6% of the company's projected market capitalization each year.
Micron and SK Hynix shares also gained ahead of earnings from major technology companies, beginning with Alphabet's quarterly report on Wednesday. Investors are looking for confirmation that large technology companies will continue increasing AI infrastructure spending, supporting demand for high-bandwidth memory and related components.
For more context on recent memory sector moves, see Micron, SanDisk Rebound 3% and 2.5% as Dip Buyers Test Memory Sector After 30% Rout and Memory Chip Stocks Slide as TSMC's Capex Hike Triggers Broader Semiconductor Selloff. Additionally, Micron Jumps 4% as KeyBanc Sees Memory Tightness Through 2027 and SanDisk Down 35%: Analysts See 115% Upside Amid Memory Selloff offer further perspective on analyst sentiment.
This article is for informational purposes only and does not constitute financial advice.
