SK Hynix: Memory Supercycle
Why memory stocks are positioned for massive growth.
ai needs a lot of memory. there's 3 main companies in this market: SK hynix, Samsung, and Micron I think it's a good area to make a bet in, as we're going to see all key metrics explode -> revenue, profit, profit margins
SK hynix is currently relatively dominant, holding 62% of HBM (high bandwidth memory) sales.
This means dominance on one of the key AI infra components, and is expected to lead for next generation HBM4 as well
Our thesis has 4 parts:
- modelled demand from nvidia & other players
- memory market is running out of any existing stock, supply is being completely bought up
- indicators that memory manufacturers are scaling up their supply significantly to meet this new demand (ASML data)
- memory manufacturer margins will increase or sustain
My thesis is that memory is shifting from a commodity to a high-margin essential component.
As such, I expect memory players like SK hynix and others to be big beneficiaries on the next wave of AI capex spend.
Elaborating on each part:
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many numbers i'll spare you it
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"Memory module maker ADATA Chairman Simon Chen stated that the global memory market is facing an unprecedented shortage (called it "near empty") in DRAM, NAND, and HDD. These product lines are experiencing simultaneous supply tightness for the first time." We're seeing existing supply exhausted across the board, even down to old generations like DDR4. With prices starting to increase to match that.
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ASML now reporting 186% q/q growth in bookings in the memory sector. Memory manufacturers ordering EUV is a really big deal, this is a signal of massive investments made. This signals that memory manufacturers are URGENTLY scaling up their manufacturing capacity to meet the increasing demand.
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SK Hynix last earnings report reported a 41% operating margin. A lot of this is stemming from the exceptional margins on HBM3E, and their slightly monopolistic position in being able to supply it. HBM itself is 50%+ gross margin and becomes an increasingly large part of the portfolio, so I expect they will be able to hold a very profitable operating margin in 2026 onwards as well.
it's a perfect storm of ingredients starting to line up
partially priced in by market already, but I think there's enough room to run upward even further as more and more players are "realizing" it
glgl