History Says Memory Stocks Like Micron and Sandisk Rarely Stay This Profitable for Long. Here's the Case for Why It's Different This Time.
The boom-and-bust memory cycles of the past few years may be over.
Overview
The memory market is having one of its best historical runs ever, helping lift the stocks of both Micron Technology (NASDAQ: MU) and Sandisk (NASDAQ: SNDK). Both have seen their revenue soar and their gross margins balloon, leading to record profits and cash flow.
Micron is one of the big three DRAM makers, along with Korean companies SK Hynix (NASDAQ: SKHY) and Samsung, while it gets nearly a quarter of its revenue from NAND (flash) memory. Sandisk, meanwhile, is a pure-play flash memory maker. The rise in both memory markets is directly linked to the artificial intelligence (AI) infrastructure build-out, although the dynamics behind the current supply-demand imbalances are a bit different.
Details
Flash memory was in a major bull market during the COVID-19 pandemic, as stay-at-home mandates led to a surge in demand for electronics, which are heavy users of flash memory. This led memory makers to increase their NAND capacity, while demand crashed after the pandemic ended. This led to a massive oversupply of NAND, negative gross margins, and to the big three memory makers reducing capacity and turning their attention to more lucrative DRAM.
Source
Originally published at www.fool.com.