AMD and Micron Target the 2 Trillion $ Market Cap, According to a Wall Street Analyst

Ben Reitzes, technology research director at Melius, noted in a Wednesday note that AMD and Micron are on trajectories that could propel each of them to the 2 trillion $ market cap threshold, a level currently reserved for a few digital giants (CNBC).

AMD and Micron Aim for 2 Trillion $ Market Cap

Similarly, the same analyst highlights that just months after major memory manufacturers crossed the trillion-dollar mark, the two stocks under study possess the levers needed to double this value. According to Reitzes, "Micron and AMD could both be on the path to a 2 trillion $ market cap," a claim based on current semiconductor market dynamics and long-term growth expectations (CNBC).

AMD, the CPU leader, should see its earnings per share (EPS) surpass $50 to cross the next trillion, far exceeding its goal of over $20 EPS by 2030. "To reach its next trillion, it will likely need to demonstrate that a $50+ EPS is possible," Reitzes explains (CNBC). This ambition implies a significant increase in profitability beyond current consensus expectations.

Growing Role of CPUs in Generative AI

Reitzes explains that the rise of "agency" AI enhances the importance of CPUs, as system architectures require more central processing units (CPUs) than graphics processing units (GPUs). This shift, driven by the need to manage more autonomous AI models, creates a favorable environment for AMD's margins, given its strong market share in high-end processors. The transition from GPU dominance to hybrid architectures increases demand for x86 chips, where AMD positions itself as Intel's direct competitor.

This technological paradigm shift also brings increased pressure on margins but presents an opportunity to monetize CPU-based software licenses and cloud services. The combination of improved performance and lower energy costs makes AMD's CPUs particularly attractive for data centers seeking to optimize operational expenses.

Memory Efficiency as a Driver for Micron Valuation

For Micron, the key lies in the efficiency gains of memory in AI workloads. Reitzes indicates that "computational efficiency in AI comes from increased memory usage in systems," which drives demand for Micron's DRAM chips (CNBC). However, the sector remains cyclical, with boom periods followed by significant troughs, temporarily curbing the company's valuation.

The analyst adds that Micron could repurchase 25% of its market cap by 2027-2028, a plan he deems "not even Jensen can do," referencing NVIDIA CEO Jensen Huang (CNBC). This massive buyback potential, if realized, could support the stock price and reduce the float, thereby increasing upward pressure on market capitalization.

Burry's Skepticism on Memory Sector Cyclicality

Michael Burry, famous for anticipating the 2008 housing crisis, offers a contrasting viewpoint on the memory sector cycle. In a September 22 Substack post, he writes: "Over the next two years, this shortage will be resolved as production catches up, and memory will once again enter a downcycle" (CNBC). He believes increased Chinese production capacity will ease supply tensions that fueled sector margins.

Burry anticipates that supply rebound will lead to price corrections and a return to traditional cyclical patterns, which could curb Micron's market cap ambitions. This outlook contrasts with Reitzes' optimism and highlights the stock's sensitivity to global DRAM chip supply changes.

Implications for Valuations and Expected Price Movements

Micron is set to report earnings after Wednesday's close, with FactSet projections of $31.72 EPS and $5.133 billion in sales. Market makers already anticipate a 7% post-earnings stock price swing (CNBC). By noon ET, the stock was up 0.8%, having risen 276% year-to-date, reflecting investor enthusiasm for the memory segment (CNBC).

These high expectations, coupled with the prospect of 2 trillion $ valuations for both stocks, create a pricing dynamic that could lead to significant capital flows into the semiconductor sector. Investors must, however, monitor the inherent volatility tied to the memory cycle and changes in AMD's EPS projections, which remain the key factor in reaching the additional trillion threshold.