Micron, Sandisk, and SK Hynix: History Says This About the Memory Trio's Rally
History says the market will eventually collapse, but this time does look different.
Overview
Memory stocks have been on a tremendous run over the past year, buoyed by surging prices, ballooning gross margins, and huge free cash flow. This has helped the stocks of Micron Technology (NASDAQ: MU), Sandisk (NASDAQ: SNDK), and SK Hynix (NASDAQ: SKHY) (before its U.S. IPO) go parabolic this year. Micron is up more than 700% over the past year, while Sandisk is up an almost inconceivable 3,400% during the same stretch. SK Hynix's Korean shares, meanwhile, have surged 600% during the past year.
The current memory supercycle can be tied directly to the AI infrastructure build-out, which has led to major supply-demand imbalances. The memory market is divided between DRAM (dynamic random access memory), used for very short-term storage, and NAND (flash), which retains data longer. Both have seen tremendous increases in AI-related demand.
Details
The biggest driver in the market right now is high-bandwidth memory (HBM), which is packaged with graphics processing units (GPUs) and other AI chips to reduce latency and power consumption. It's one of the biggest bottlenecks in all of AI, and as such, the big three DRAM makers -- SK Hynix, Samsung, and Micron -- have been dedicating most of their resources to keeping up with demand. This is leading to a supply shortage across the entire DRAM market and skyrocketing prices.
Source
Originally published at www.fool.com.