Micron (MU) and SanDisk (SNDK) have delivered the sort of gains investors typically wait years for.
Micron traded around $1,012 on August 18, while SanDisk changed hands near $1,787. Seeking Alpha data show both stocks up 254% and 653%, respectively, in 2026.
Interestingly, that rally has been so intense that even after hedge fund billionaire David Tepper slashed his position by 41%, the value of Appaloosa’s remaining stake doubled from $562.5 million to $1.125 billion between March 31 and June 30.
The tremendous rise is becoming tougher to dismiss as just another temporary memory boom.
For perspective, TrendForce expects the DRAM market to surge to $618.7 billion this year, up 303%, as AI continues to absorb capacity.
Specifically, Micron has secured $22 billion of commitments from 16 customers through multiyear agreements, offering far more visibility in an otherwise an historically cyclical business.
In its Q3 2026 earnings call, Micron CEO Sanjay Mehrotra went even further, saying,
“Currently, we do not have a line of sight into when the memory supply will be able to catch up with increasing demand.”
Now, Bank of America, in a note shared with me, says SanDisk may have given Micron investors an important clue about what comes next.
After SanDisk laid out remarkably durable top-line growth and margin expectations on its Investor Day, BofA analysts led by veteran Vivek Arya argue that it could be a template for Micron as well.
Tom Williams/CQ-Roll Call, Inc via Getty Images
SanDisk changes the Micron valuation debate
Bank of America’s Micron thesis begins with an idea that’s been thrown around quite a bit since the AI-led memory surge swept markets.
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Like five-star Phillip Securities analyst Pierre Ferragu, BofA analysts believe investors are valuing Micron using the wrong post-AI memory-cycle framework.
Consequently, the bank reiterated its Buy rating and doubled down on its $1,550 price target, implying 61% upside from the $963 stock price used in the report.
The target is built based on two distinct businesses.
BofA is valuing Micron’s traditional cyclical memory segment at $1,040 per share, using 3 times estimated CY28 book value, while valuing AI-focused HBM business at 31 times CY28 earnings, aligning with its powerful AI compute peers.
The SanDisk signal, in particular, is important, as it challenges how much of Micron could still be treated as a “traditional” cyclical memory player.
At its Analyst Day, SanDisk forecast nearly 15% annual sales growth, with gross margins expected to rise to over 80% through fiscal 2030, driven by customer commitments and supply discipline.
According to Seeking Alpha, the memory giant’s trailing-12-month gross margin is 72%, so 80% is impressive given the already high bar.
BofA analysts argue that if a similar framework is applied to Micron, which produced $200 to $250 in FY30 EPS, it would imply peak earnings of roughly $160 to $170 over the next couple of years.
The implications for valuation are huge, and if Micron can sustain those elevated margins and earnings with less choppiness, investors might eventually justify paying 12 to 15 times earnings, rather than treating every surge in profits as the beginning of the next downturn.
Micron stock has traded at 18 times non-GAAP earnings over the past 5 years, meaning it would still be trading well below its historical average according to Seeking Alpha.
Micron’s cash flow could become the next catalyst
The Sandisk comparison becomes even more compelling when BofA moves from earnings to cash.
Under its Sandisk-like scenario, Micron’s FY30 EPS reaches nearly $236, growing at a 34% compound annual rate from FY26 through FY30. Free cash flow reaches close to $189 billion in FY30, while sales jump to $377 billion.
But BofA sees Wall Street not fully pricing in potential share buybacks.
Once Micron’s CHIPS Act restrictions expire on December 9, 2026, the bank expects the memory giant to follow through on its commitment to return 100% of free cash flow to stockholders.
BofA models over $80 billion of trailing 12-month free cash flow around that point, enough to buy back nearly 10% of Micron’s market cap annually. Consensus assumes less than 50% of free cash flow goes toward repurchases.
Buybacks can create a second earnings engine alongside operating growth.
If Micron’s profit pool grows while its share count falls, EPS could compound a lot faster than sales alone would imply. Also, consistent capital returns could help reduce the volatility discount that’s typically applied to memory stocks.
For perspective, Micron’s weighted average share count has barely moved over the past five years, rising from 1.12 billion shares in 2021 to 1.125 billion TTM, meaning investors have faced hardly any dilution, according to Seeking Alpha.
Additionally, BofA is pushing back against concerns that lower-memory configurations in Nvidia’s Rubin Ultra platform could weigh down HBM demand.
It argues that larger HBM4e and HBM5 configurations, along with higher GPU unit volumes, should maintain aggregate demand.
What Micron investors should watch now
The big takeaway from BofA’s latest note has less to do with AI demand (no real questions about that) and more about what Micron does with its cash flow.
One of the biggest risks to BofA’s bullish thesis is the cash-flow conundrum Micron faces.
With $640 billion of cash flow through FY30, that creates a capital allocation test. Management could return that cash through buybacks and dividends, inflating EPS or potentially redirecting that capital to expand AI capacity.
Investors should therefore monitor three things.
The first thing is margin durability. The SanDisk signal only works if Micron’s gross margins remain unusually elevated instead of collapsing once supply catches up.
The other thing to look at is capital discipline. A clear acceleration in buybacks following December would solidify BofA’s re-rating case, as it shows that record cash is flowing back to stockholders.
Then there’s HBM demand and pricing.
Weaker data-center demand, plummeting memory prices, or market-share losses will likely challenge earnings assumptions. Moreover, the bank flags competition from Chinese memory suppliers as a major downside risk.
Hence, the bigger question is if AI demand, supply discipline, and capital returns could permanently lower the cyclicality of its business.
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