Investing.com -- Citi cut its price target for Micron Technology on Tuesday, citing weakening spot prices in the DRAM market after a sharp pullback in mainstream products.

Analyst Atif Malik wrote that “mainstream DDR5 16GB DRAM product prices are down ~6% since Micron reported,” prompting the bank to lower its price target by 17% to $425 from $510.

Despite the downgrade, Citi maintained its earnings forecasts, arguing that ongoing negotiations between Micron and hyperscalers could help stabilize contract pricing.

According to Malik, memory suppliers have begun discussions on “3-5 year strategic or long-term agreements to lock in base volumes, pre-payments, and adjustments to quarterly pricing based on market conditions,” which the analyst said should provide support even as spot prices soften.

Citi linked the recent price declines to concerns about TurboQuant, noting that at face value, efficiency techniques can reduce compute and memory cost per query.

However, Malik added that such advances “further unlock usage, which ultimately increases compute/memory demand.” Citi expects the dynamic to mirror the impact of DeepSeek, arguing that cheaper technology has historically “increased the demand for more technology.”

The note also outlined the role of KV cache in AI workloads, emphasizing its importance in enabling models to generate longer, more complex outputs. Citi noted that compute intensity rises as each new token “attends to all the previous tokens,” reinforcing the long-term structural demand for memory.

While near-term pricing pressure persists, Citi maintained a Buy rating on the stock, citing accelerating AI-driven demand.