Micron, Sandisk, and SK Hynix: History Says This About the Memory Trio's Rally

Over the past year, memory stocks have soared, with Micron Technology up over 700%, Sandisk climbing 3,400%, and SK Hynix experiencing a 600% surge. This rally can be traced back to the AI infrastructure boom, creating supply-demand imbalances. The memory market consists of DRAM for short-term storage and NAND for longer retention, both experiencing AI-related demand growth.

High-bandwidth memory (HBM) is a major bottleneck, with the three DRAM makers focusing resources to meet demand, leading to supply shortages and soaring prices. Flash memory, used in enterprise SSDs, has been supply-constrained as memory makers prioritize HBM. Historically, memory cycles have reached a point where supply overtakes demand, causing prices to drop.

However, this cycle appears different due to the ongoing surge in AI infrastructure demand and the struggle of memory makers, particularly those specializing in HBM, to keep up with supply growth. Factors limiting supply growth include limited EUV machine capacity, the need for more wafer capacity for HBM, and extended lead times for constructing new clean rooms.

All major memory makers, including Sandisk, have secured long-term contracts for the first time. Despite a long runway ahead for DRAM and NAND memory cycles, the high valuations of memory stocks make them strong candidates for AI stock investment.