Investing.com -- Morgan Stanley said Micron Technology delivered one of the largest revenue and profit upside surprises in U.S. semiconductor history, surpassed only by Nvidia, after issuing guidance far above market expectations.

The bank raised its price target on Micron to $350 from $338 and reiterated an Overweight rating, calling the stock its “top pick in U.S. semis.”

Micron guided to non-GAAP earnings of about $8.19 per share, compared with consensus expectations of $4.78.

Morgan Stanley analyst Joseph Moore said management’s outlook implies “revenue guidance $3.7 bn above consensus and net income guidance 75% above,” with EBIT margins reaching levels rarely seen in the sector.

He added that this represents “likely the best revenue/$ net income upside in the history of the U.S. semis industry” outside of NVIDIA.

Moore believes the upside reflects strong DDR5 pricing, improving visibility in high-bandwidth memory and disciplined capital spending.

“As long as the AI music plays, we believe this is going to keep happening, as AI CAGRs off of ever bigger numbers are now pressuring the overall semi supply and demand,” wrote Moore.

The analyst expects AI-related momentum to continue through at least 2026 and likely 2027, even as it flagged longer-term uncertainty beyond that period.

Furthermore, Morgan Stanley stated that Micron’s earnings appear “above through cycle, but seem likely to keep improving,” supported by more than $35 billion of free cash flow generation.

While acknowledging valuation concerns after the stock’s recent rally, Morgan Stanley feels conditions in memory markets remain exceptionally strong.

“This has been the most rapid inflection we have seen in 32 years of covering memory stocks,” the bank declared, adding that earnings power could move north of $40 if current trends persist.