Memory chip companies like Micron and Sandisk saw their stocks jump again on Monday, continuing a strong run. Melius Research believes high demand for memory could last until the end of the decade, fueling these gains.
These companies are benefiting hugely from a global shortage of microchips needed for artificial intelligence. A special type of memory called High Bandwidth Memory (HBM) attaches directly to advanced graphics cards from Nvidia and AMD. These cards power almost all major AI data centers. Ben Reitzes, an analyst at Melius, upgraded Micron to a “buy” rating on Monday. He thinks Micron’s stock could go up another 41% in the next year. Micron’s stock has already climbed over 550% in the last year, including a 5.6% gain on Monday.
“The market will eventually pay more for the stable profit and demand that AI creates,” Reitzes wrote. He expects Nvidia to invest more in memory soon, adding, “We are only at the beginning of this AI phase, and the need for memory has never been stronger.” Micron’s stock is at an all-time high, with its market value nearing $600 billion. Sandisk’s stock rose 8.1% on Monday and is up over 3,000% in the past year, pushing its market value beyond $157 billion. Reitzes predicts Sandisk’s stock will increase another 36% in the next 12 months.
Bernstein analyst Mark Newman, who also recommends buying Sandisk, said, “The numbers speak for themselves. Earnings forecasts are going way up, driven by very, very strong memory prices.” HBM uses stacks of common memory called Dynamic Random Access Memory (DRAM). DRAM allows for fast, temporary data storage, helping graphics cards handle many tasks at once.
Micron, Samsung, and SK Hynix, the world’s top memory makers, have mainly used their DRAM supply to make HBM. This has caused a shortage of general-purpose memory, making prices skyrocket. Counterpoint Research data shows the DRAM market grew 30% for two quarters in a row due to rising prices.
This means everyday electronics cost more. Gartner expects PC prices to go up by 17% this year. The solid-state drives (SSDs) in PCs now cost two or three times what they did in December. Sandisk is a big maker of SSDs, which use NAND memory. NAND is another type of flash memory that stores data even when devices are off. Demand for NAND is also surging because AI servers need more and more data storage.
Memory buyers are now signing longer contracts, sometimes for three or even five years. SK Hynix and Micron noted that big cloud companies are more willing to sign long-term deals to ensure they get enough memory. Broadcom, for example, has secured its memory supply until 2028.
Newman explained that memory makers also prefer longer contracts for more reliable demand, especially if they plan to expand production. Building new factories takes about two and a half years before they can start making chips. Micron is investing $24 billion to expand its NAND factory in Singapore and build huge new chip factories in New York and Idaho. SK Hynix has started building its first U.S. memory packaging plant in Indiana and is also expanding production in South Korea.
