Micron Stock Breaks Triangle Resistance as AI Memory Demand Puts $1,034 in Focus

Micron reported Q3 revenue at $41.46 billion, up from $23.86 billion in Q2 and $9.30 billion a year prior. Cloud Memory closed the fiscal quarter at $13.77 billion, while Core Data Center closed at $11.52 billion. Gross margins were reported at 83% for Cloud Memory and 87% for Core Data Center.

Micron also saw $25.39 billion in operating cash flow and $18.3 billion in adjusted free cash flow. The shift in business is clearly with AI, as the margins from this dynamic are much higher than typical DRAM revenue.

When setting guidance for Q4, management is still targeting revenue of $50 billion. They are targeting a gross margin of around 86% as well. Management's guidance is $30.73 a share, plus or minus $1, for GAAP diluted EPS. For non-GAAP EPS, management has guided to $31.00, plus or minus $1.

At the midpoint, revenue would be about 21% higher than the previous quarter. The 86% gross margin suggests tight market conditions for a memory manufacturer. Micron should report the unfinished quarter on September 30, making this the next important company-specific catalyst.

Micron said that HBM4 based on 1-beta DRAM has already reached high-volume shipments for its lead customer's platform, with qualification samples shipped to multiple additional customers. In addition, development of HBM4E based on 1-gamma DRAM is underway. Volume production of HBM4E is expected in calendar 2027.

The rest of the memory market is looking solid. Higher demand for HBM is increasing the demand for wafer capacity which is tightening conventional DRAM supply. This is why memory stocks outperformed on Friday even though the market weakened after a strong U.S. jobs report.

Disruption in Micron’s supply chain may occur as the unions in Taiwan threaten to strike over bonuses and profit sharing. Roughly 10,000 of Micron’s 15,000 employees in Taoyuan and Taichung have union representation, and over 80% of respondents in the union’s survey supported collective action.

There have been no confirmed strikes or reported production disruptions. For the time being, this is a risk to Micron’s supply chain, as a dispute may create a manufacturing disruption. Taiwan is a major Micron production hub in a tight global memory supply market.

Micron revealed around $22 billion of strategic customer commitments to ensure a stable supply of memory. Micron expects $22 billion of cash deposits and related financial commitments under strategic customer agreements. These customer commitments illustrate the desire of hyperscalers and data center customers for assured access to DRAM and HBM.

Longer customer commitments provide a measure of predictability to memory markets; however, the competitive nature of the memory market will eventually result in oversupply.

The last closing price of MU was $1,016.59, and it traded post market at $1,014.95, which was very close to the chart’s reference of $1,014.85. Price has cleared both the descending triangle and the resistance of $959.02 and is well above the moving average of $938.51.

Micron Stock Price Chart - Source: Tradingview

The next resistance is $1,034.50. If this level is successfully traded above for 2 hours, then $1,097.35 and $1,164.05 will become the next targets.

RSI being at or around 74 is well into the overbought zone at 70. Slightly overextended markets often consolidate or pull back, and then gain strength once again. Currently if it breaks down, there is very strong support at $959.02. A break of this level would draw immediate buying once it tests the 50 DMA at $938.51 and $887.48.

Key Levels

·       Latest completed close: $1,016.59

·       After-hours indication: Around $1,014.95

·       Critical breakout support: $959.02

·       Moving-average support: $938.51

·       Deeper support: $887.48

·       Breakout resistance: $1,034.50

·       First upside target: $1,097.35

·       Higher target: $1,164.05

·       RSI: Around 74, overbought

There are a few tailwinds in Micron keeping the Microelectronics stock at top interest. Memory demand at data centers is at record levels. Micron is one of the first to ship volume of High Bandwidth Memory, or HBM4. The company has exceptional supply and guidance for Q4. The biggest company-specific concern is the labor dispute in Taiwan. The next major event following would be if Micron released earnings on September 30.

If Micron stock were to break above $1,034.50 for the next two hours, then it could continue breaking the current resistance, and the next levels of $1,097.35, and potentially $1,164.05, could be tested.

Micron is riding the best tailwinds of its kind. Guidance and record shipments of HBM4 are building the thesis of AI memory. Fundamentals are strong, with an exceptional Q3 and Q4 guidance. The stock is technically overbought after a large run on Friday. The stock will consolidate after a large run. The bullish stance will remain as long as $959.02 holds and $1,034.50 is the level that must break.