Micron Technology stock was falling 7.8% on Friday as guidance for lower profit margins overshadowed its better-than-expected earnings.

That’s not putting off analysts who back the growth of artificial-intelligence hardware to keep boosting the market for its memory chips.

However, Wall Street is still confident high-bandwidth memory (HBM)—a necessary component of the latest AI processors from the likes of Nvidia—is set to drive Micron’s growth in the longer term.

Micron said that sales of HBM chips surpassed the $1 billion milestone in its fiscal second quarter, ahead of its own estimates and up 50% sequentially. It raised its forecast for the total addressable market of HBM chips in 2025 to more than $35 billion from $20 billion previously.

“With HBM sold out through this year, and HBM requirements only looking to increase…for the foreseeable future (on the back of both strong AI demand as well as increased bit equivalency metrics), we see HBM growth as a tailwind that looks set to persist into CY’26 [calendar year 2026],” wrote Wedbush analyst Matt Bryson in a research note.

Bryson raised his target price on the stock to $130 from $125, while keeping an Outperform rating.

The question for Micron is whether growth in HBM chips can offset any cyclical weakness in DRAM—or dynamic random-access memory—or NAND chips in its core end markets of PCs, mobile phones, and data centers.

One negative that multiple analysts flagged was Micron’s guidance for its gross margin to fall to 36.5% in its fiscal third quarter from 37.9% in the second quarter, before rising again in its fourth quarter.

“We think this is largely due to the NAND business where Micron is putting more bits into consumer markets with lower prices and margins to move NAND bits off the balance sheet,” wrote UBS analyst Timothy Arcuri in a research note.

Micron Chief Executive Sanjay Mehrotra said in a statement demand for its DRAM and NAND products is growing in data center and consumer-oriented markets. 

“We see no change in the big picture story here—Micron has established technology leadership in HBM and its ramp is siphoning wafers away from traditional PC/smartphone memory markets, meaning that DRAM should operate with more sustained supply/demand dynamics as long as AI continues to grow,” Arcuri wrote. 

Arcuri kept a Buy rating and $130 target price on the stock.