Memory Chip Stocks Surge as AI Demand Drives Record Gains Through Decade

Shares of memory companies Micron and Sandisk jumped on Monday, continuing their extended runs, after Melius Research said demand could remain high through the end of the decade. Memory companies are experiencing major gains from a global shortage for microchips to power artificial intelligence. High Bandwidth Memory, or HBM, is bonded directly to the most advanced graphics processing units from Nvidia and Advanced Micro Devices that power nearly all major AI data centers.

Ben Reitzes, an analyst at Melius, upgraded to a buy rating on Monday, noting it could gain another 41% over the next 12 months. The stock is up more than 550% over the past year after gaining 5.6% on Monday. "The market will eventually be willing to pay more for the unusual durability of the margin and demand profiles that AI makes possible," Reitzes wrote, adding that he expects Nvidia to invest more in memory soon. "We are only in the early innings of this AI cycle and the need for memory has never been stronger." Micron is trading at a record and it's market cap is approaching $600 billion.

Sandisk gained 8.1% on Monday and is up over 3,000% in the past year, pushing its market cap past $157 billion. Reitzes predicted the stock will rise another 36% over the next 12 months. "The numbers speak for themselves," said Bernstein analyst Mark Newman, who has a buy recommendation on Sandisk. "Earnings revisions are coming up significantly, and that's powered by very very strong memory prices."

HBM is made up of stacks of general-purpose memory known as Dynamic Random Access Memory, or DRAM, that enables fast, temporary data storage so the GPU can run parallel tasks. Micron, Samsung and SK Hynix, the world's top memory makers, have largely used their DRAM supply to make HBM. The result is a general-purpose memory shortage that's caused prices to skyrocket. According to data from Counterpoint Research, the DRAM market has recorded 30% quarter-over-quarter growth for two consecutive periods, driven by rising memory prices. That means consumers are paying more for electronics. Gartner predicts PC prices will rise by 17% this year. The solid-state drives used inside PCs now cost two or three times what they did in December.

Sandisk is a major maker of solid-state drives, which rely on what's known as NAND memory, a type of flash memory that stores data even when devices are turned off. NAND is experiencing a similar surge in demand as AI servers need increasing amounts of data storage. Market conditions are pushing memory buyers into longer contracts, of three or even five years. SK Hynix and Micron have both said that hyperscalers have been more willing to sign long-term supply agreements in an effort to edge out the competition in securing enough memory. Chip design firm Broadcom, for example, has locked in memory supply through 2028.

"Memory makers also have a willingness to go longer term because they want to get more reliable demand, especially if they're thinking about adding capacity," Newman said, adding that it takes about two and a half years to build new factories before production can begin. Micron is spending $24 billion on a major expansion of its NAND manufacturing facility in Singapore, while also building huge new U.S. chip fabs in New York and Idaho. SK Hynix has broken ground on its first U.S. memory packaging plant in Indiana, and is expanding production and packaging with new facilities in South Korea. Sandisk reports quarterly results next week.