SanDisk's Financial Outlook Applied to Micron: EPS Jumps Over 70%... Memory is the AI Ecosystem Bottleneck

Investor sentiment for memory semiconductors in general seems to be recovering after SanDisk's Investor Day presentation. SanDisk garnered market attention by presenting strong performance guidance in its announcement.

This positive atmosphere is not limited to SanDisk but is spreading across the entire memory semiconductor sector.

SanDisk assumed that revenue would grow at an average annual rate of 15% to 19% from fiscal year 2028 to 2030. It also projected that the gross margin would remain around 80%.

These revenue growth rates and high margin rates reflect SanDisk's confidence in long-term profitability improvement.

SanDisk explained that this long-term growth is possible through the expansion of long-term contracts. It announced that approximately 50% of revenue would be tied to long-term contracts next year, and that proportion would reach about two-thirds by 2028.

This is interpreted as a strategy to reduce revenue volatility and establish a stable revenue base.

Bank of America conducted a simulation by applying SanDisk's long-term financial assumptions directly to Micron. This involved applying SanDisk's 80% gross margin, 50% free cash flow (FCF) margin, and mid-to-high teen revenue growth rate to Micron.

It emphasized that this simulation assumed an extremely optimistic scenario where the structure of the memory industry completely changes, and it is not Bank of America's base forecast.

Within the vast current of the AI ecosystem, NAND and DRAM are expected to show a synchronization phenomenon, moving together. It is difficult to imagine a situation where NAND sells well but DRAM does not, or vice versa, as the AI ecosystem develops.

This reflects the view that both NAND and DRAM act as essential elements for AI technology development, driving demand for each other.

If SanDisk's financial assumptions are applied to Micron, Micron's earnings per share (EPS) are projected to increase significantly. According to Bank of America's simulation, the consensus EPS could rise from $2.48 in 2027 to $15.1, from $2.85 in 2028 to $16.8, and from $3.28 in 2029 to $19.96.

This is the result of directly applying SanDisk's 80% gross margin assumption to Micron, representing an increase of over 70% compared to current consensus.

SanDisk is asserting a structural change in the memory industry through the expansion of long-term contracts. The logic is that this will reduce price volatility, maintain tight supply, and sustain high margins in the long term.

If this logic also applies to the DRAM market, it is conceivable that Micron's profits would increase enormously.

Bank of America re-emphasized that this simulation is not a normal base scenario. These are results that could occur under the extreme assumption that the memory industry transforms into an entirely different industry.

Therefore, Bank of America is not putting forward this scenario as its primary argument.

The background for Bank of America's release of these simulation results is the formation of market confidence after SanDisk's IR event. The market believes that the blueprint presented by SanDisk has some realism, driving up stock prices.

Furthermore, considering the current state of the AI ecosystem, it was also considered difficult to imagine a scenario where only NAND or DRAM experiences explosive growth. In other words, the recognition that NAND and DRAM will grow together with the development of AI technology was reflected.

Peter Diamandis, an American serial entrepreneur, futurist, and technology investor, asserted that the true bottleneck in the era of Agent AI is not computing, but memory. Elon Musk responded, saying, "Few people know this fact."

This statement once again highlights the importance of memory as a core element in the development of AI technology.