Goldman Sachs points Micron prediction forward of earnings

The hovering funding in knowledge heart infrastructure to allow synthetic intelligence has created a scarcity of reminiscence, inflicting costs to spike and providing help for Micron Know-how’s upcoming quarterly earnings report.

The reminiscence bottleneck has been known as out as a rising downside for suppliers of high-end AI servers, together with Dell. In its third-quarter earnings name, Dell mentioned greater reminiscence costs are growing its prices and reminiscence shortages are difficult.

“We’re in a very unique time. It’s unprecedented. We have not seen costs move at the rate that we’ve seen. And by the way, it’s not unique to DRAM. It’s NAND,” mentioned Dell Vice Chairman Jeffrey Clark.

The tailwinds behind a budding reminiscence supercycle aren’t misplaced on Goldman Sachs. The 156-year-old funding agency is arguably probably the most revered Wall Road analysis agency, and it is witnessed its fair proportion of reminiscence supercycle booms and busts since Intel launched the 1024-bit (1K) Intel 1103 DRAM chip, the primary mass-produced semiconductor reminiscence chip, in 1970.

This week, Goldman Sachs analysts supplied up to date ideas on Micron forward of its deliberate quarterly earnings name on Dec. 17. The analysts provided a principally bullish outlook, calling for outcomes greater than Wall Road’s consensus estimates. In addition they weighed in with early ideas on how 2026 might form up, and detailed the important thing issues to observe in Micron’s report that would transfer its inventory value.

Reminiscence market catches hearth on AI demand

A gold rush to safe high-performance computing energy has been underway since 2022, when the discharge of ChatGPT sparked a frenzy of AI analysis and growth. Nearly everyone seems to be utilizing massive language fashions to enhance, and typically exchange, conventional search. And most firms are knee deep in creating and implementing agentic AI apps that may streamline, help, and in some circumstances, exchange staff.

The tempo of AI R&D rivals the daybreak of the Web; nonetheless, the required knowledge heart horsepower far exceeds something witnessed thus far. Because of this, the biggest cloud service suppliers are investing a whole lot of billions of {dollars} in next-generation servers powered by AI-optimized chips, corresponding to GPUs, TPUs, and XPUs.

“Training is significantly and increasingly compute-intensive, but early LLM demands were manageable. Today, compute needs are accelerating rapidly, particularly as more models move into production,” wrote JP Morgan strategist Stephanie Aliaga in October. “Nvidia estimates that reasoning models answering challenging queries could require over 100 times more compute compared to single-shot inference.”

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The push to retrofit knowledge facilities with AI-optimised server racks has uncovered a collection of provide bottlenecks, together with shortages within the reminiscence market, which is dominated by Samsung, SK Hynix, and Micron (MU). These firms market DRAM (Dynamic Random Entry Reminiscence), NAND flash, and Excessive Bandwidth Reminiscence (HBM), a high-demand reminiscence specifically designed for AI purposes. 

The dearth of provide has led to surging reminiscence costs within the spot market, which, in flip, are starting to move via into contracted provide costs. Because of this, speak of a budding reminiscence supercycle has emerged, fueled partially by main capability enlargement bulletins from the most important gamers, together with Micron, which lately exited the patron reminiscence market to unlock extra reminiscence manufacturing for the AI market.

“The AI-driven growth in the data center has led to a surge in demand for memory and storage. Micron has made the difficult decision to exit the Crucial consumer business in order to improve supply and support for our larger, strategic customers in faster-growing segments,” mentioned Sumit Sadana, EVP and Chief Enterprise Officer at Micron Know-how.

The surge in demand, tight provide, and spikes in reminiscence costs have led Wall Road corporations, together with Goldman Sachs, to spice up their outlook for Micron, which is anticipated to report quarterly outcomes mid-month.

Goldman Sachs points Micron pre-earnings forecast

Goldman Sachs expects a robust report from Micron and predicts Micron will supply upbeat steering.

In a analysis be aware shared with TheStreet, Goldman Sachs’ analysts wrote:

Goldman Sachs’ analysts anticipate that Micron will ship third-quarter income of $13.2 billion, surpassing Wall Road’s consensus estimate of $12.7 billion. They anticipate $4.15 per share in earnings, which is above the typical estimate of $3.84.

In addition they anticipate the gross margin to be 53.6%, which is greater than Wall Road’s consensus of 51.6%.

General, forward of Micron’s earnings, Goldman Sachs raised its income and non-GAAP EPS estimates by 9% and 19% for 2026 and 2027 “to account for more positive industry pricing trends since our last update.”

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Goldman Sachs expects traders will give attention to three key themes inside Micron’s report to tell sentiment into 2026:

• Sustainability of pricing energy – It expects “further color on whether the current pricing upcycle can sustain over the next few quarters in DRAM.”
• HBM roadmap – Goldman Sachs anticipated the corporate will “comment on its near-term share target in HBM, and to what extent HBM4 will improve the company’s position.”
• Gross margin path – Its analysts “believe additional commentary on the path forward for gross margin will be important.”

What’s subsequent for Micron?

Goldman Sachs’ revised 2026 income and earnings estimates are 5% and 10% above Wall Road’s consensus outlook, suggesting that if Goldman’s modeling is right, many analysts will probably be pressured to play catch-up, growing their projections.

At present, Goldman Sachs’ newest quantity crunching is modeling 2026 income of $60.8 billion, up from $57.2 billion beforehand, and 2027 income of $68.9 billion, up from $62.2 billion.

On the underside line, its analysts challenge calendar 2026 EPS of $21.01 and 2027 EPS of $23.81.

Goldman Sachs’ new earnings outlook additionally led it to rethink its inventory value goal. It now thinks Micron shares may commerce to $205, up from a previous goal of $180.

It lists the next as catalysts that would affect outlooks:

• “Continued execution on the company’s HBM roadmap and share gain vis-a-vis Samsung and SK Hynix,
• Sizable step-up (above current expectations) in HBM content for AI accelerators,
• Continued signs of CXMT gaining DRAM market share, negatively impacting pricing dynamics.”

Goldman Sachs is not the one Wall Road agency anticipating a surge in Micron. In a analysis be aware shared with TheStreet, Morgan Stanley additionally struck a bullish tone.

“We are entering uncharted territory, as we have a 2018 style shortage forming but from a much higher EPS starting point; we expect serial upwards revisions to continue,” wrote Morgan Stanley’s Moore in a analysis be aware. “Since we upgraded MU to OW slightly over a month in the past, DDR5 spot pricing has tripled and in a historic sense, to search out this sort of transfer in DRAM pricing you’d doubtless have to return to the cycles of the Nineties.”

Associated: Dell earnings ship blunt Micron message