Stifel has launched coverage on Micron Technology (NASDAQ:MU) with a positive outlook, assigning an Outperform rating as it anticipates a prolonged upswing in the memory sector. This optimistic stance is grounded in structural demand growth, notably from artificial intelligence (AI) applications, combined with persistent supply tightness that is expected to extend through 2027.
The investment firm highlights Micron's strategic positioning to benefit from rising average selling prices (ASPs) and the market's shift toward higher-margin memory products. Memory currently represents a critical constraint in AI computing systems, especially with the increased need for high-performance, higher-bandwidth memory (HBM) solutions to support more advanced AI configurations.
"Memory access continues to be a primary bottleneck in AI hardware racks and systems, driving demand for advanced HBM technologies," Stifel explained in a recent research note.
Anticipating ongoing supply limitations, Stifel foresees sustained pricing power and expanding profit margins for Micron. The firm projects a substantial rise in non-GAAP earnings per share (EPS), estimating an uplift exceeding 275% over the next two years, led by growth in ASPs and sales of premium memory products.
High bandwidth memory is emphasized as a pivotal growth driver. With AI models growing in sophistication and requiring rapid access to large data pools, the proportion of AI infrastructure spending allocated to memory has increased significantly. Micron, as the second-largest market participant in this segment, is forecasted to see HBM revenue surge by approximately 164% in fiscal 2026, followed by a further 40% increase in fiscal 2027. Its other memory offerings, including DDR and QLC NAND products, are also expected to see demand uplift tied to AI developments.
Nevertheless, Stifel flags several risks that could temper Micron’s prospects. These include the potential resurgence of Samsung as a substantial competitor in the HBM space, elevated capital expenditures potentially shifting value benefits toward equipment manufacturers, a possible easing of the DRAM supply-demand dynamics, and the risk that chip makers may start designing their own base logic dies, thereby recapturing value currently attributed to HBM suppliers.
Regarding valuation, Micron is trading at roughly 9.7 times its estimated calendar 2026 earnings, marginally below its historical average. Stifel suggests that despite the valuation embedding considerable growth expectations, the stock could continue to advance, supported by a sustained, AI-driven product cycle coupled with tight supply conditions.
In a separate development, Stifel upgraded cloud security provider Datadog (NASDAQ:DDOG) from Hold to Buy. This change reflects encouraging recent performance indicators, including evidence of another substantial quarterly earnings beat propelled by accelerating core revenue growth and consistent revenue tied to OpenAI initiatives.
While adjusting the price target downward from $205 to $160, analysts consider Datadog's valuation compelling given the underlying momentum. They cite that prior investments in sales and marketing are bearing fruit, shown in core non-generative AI revenue growth advancing to around 20% year-over-year in the latest quarter. Additionally, the number of customers contributing over $100,000 in spend increased by approximately 16% year-over-year.
Datadog’s recent financial gains are also bolstered by record-breaking new-logo annualized bookings, driven primarily by larger initial contract values. Stifel anticipates that new product offerings and enhanced sales strategies will further fuel growth. Although operating margins might start 2026 slightly below Street forecasts, expectations remain for margin sustainability in the low-20% range as recent investments mature.