MW Micron's stock leads the S&P 500 for 2025. Here's why more gains could follow.

By Emily Bary

An analyst sees big upside ahead, fueled by rapid growth in high-bandwidth memory for AI

After an underwhelming end to last year, Micron Technology Inc. shares have been hot to start 2025, rising 18% to lead S&P 500 gainers on the year.

And there could be much more upside in store, according to New Street Research analysts led by Pierre Ferragu, who named the stock one of his top picks for 2025 on Wednesday. Ferragu's $145 target price is 46% above current levels.

What is Wall Street still missing on Micron shares $(MU)$? The "DRAM tsunami," he wrote, referring to dynamic random-access memory. "Data center is now over half the market and set to grow 45%, while other segments trough."

Read: Micron's stock looks like a winner after Nvidia CEO Jensen Huang's CES keynote

Ferragu projects the cost of goods sold for DRAM to be 10% above the consensus view in 2026, contributing to "monster leverage" for Micron. "With 10% more COGS, DRAM manufacturers can deliver earnings nearly 40% above expectations in 2026, as tighter capacity drives margin expansion," he wrote.

Micron also has ample opportunity in high-bandwidth memory, which Ferragu said stands to grow more than two times faster than artificial-intelligence compute revenue in the years to come. He pointed to "rapidly increasing HBM content across the board" as well as increased traction for application-specific integrated circuits, which carry more high-bandwidth memory content relative to revenue.

"In addition, top manufacturers (Nvidia, Broadcom) have signaled gross margins coming down as HBM content increase, as the mark-up on the latter is essentially lower," Ferragu wrote. That's one factor that gives him "good visibility" into upbeat high-bandwidth memory trends going forward.

Ferragu's other top picks in the technology sector are Infineon Technologies AG (XE:IFX), Nvidia Corp. $(NVDA)$ and Taiwan Semiconductor Manufacturing Co. $(TSM)$ (TW:2330). On Nvidia, his $200 target price is 43% above last close.

See also: Quantum-computing stocks sink as Nvidia CEO delivers a reality check

"The string of beats on hyperscale capex expectations is unlikely to be over," he wrote, noting that capital-expenditure expectations from hyperscalers are already up 36% over a 12-month span, in a bullish trend for Nvidia.

Ferragu's "other ideas to consider" are Advanced Micro Devices Inc. $(AMD)$, Mobileye Global Inc. (MBLY), Soitec S.A. (FR:SOI) and Uber Technologies Inc. $(UBER)$.

For AMD, his $210 price target implies 72% upside from here, though he acknowledges that "2025 could be lumpy."

Don't miss: Can AMD gain ground on Nvidia? This new bear sees a tough road ahead.

"There is limited evidence from the supply chain on AMD's traction, and Hopper availability improving this year could weigh on demand" for AMD's graphics processing units, he wrote. Hopper is one of Nvidia's GPU families.

Over a longer span, however, Ferragu thinks AMD's "challenger opportunity" will play out. "Adoption will increase further as the scalability of AMD systems improves, and the ecosystem matures," he wrote. "We expect the company to steadily gain share as a result and approach 10% in 2027."

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-Emily Bary

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January 09, 2025 10:53 ET (15:53 GMT)

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