Nvidia and SK Hynix Warn of Prolonged Memory Shortage Ahead of Micron Earnings

Key points

• Nvidia’s CFO Colette Kress stated on August 26 that memory price increases have exceeded expectations and are 'headed even higher into next year,' attributing the scarcity to the AI buildout.
• SK Hynix, which holds approximately 50% of the HBM market, does not expect the memory market to reach supply-demand balance until 2030 at the earliest.
• SK Hynix has committed roughly $38.3 billion to expand facilities in South Korea through 2031, including a new HBM fab in Yongin and a NAND plant in Cheongju.
• Micron has sold out its 2026 HBM supply and begun developing next-generation HBM4E devices, with memory chip prices nearly doubling in the first quarter.
• Micron’s stock trades at 6.6 times forward earnings, a significant discount compared to the S&P 500’s 21x multiple, despite the company surpassing a $1 trillion market valuation this year.
• Morgan Stanley doubled its price target for Micron to $1,050, while BMO Capital initiated coverage with a $1,300 target, though Citi trimmed its target to $1,150 due to concerns about potential pricing softening by 2027.

Background

Recent archive coverage highlights Micron’s strong fiscal third-quarter performance, with revenue of $41.46 billion and an 84.9% adjusted gross margin, alongside guidance for a fourth-quarter revenue of approximately $50 billion. In August, SK Hynix accelerated a 40 trillion won share buyback, signaling confidence in long-term growth. Additionally, reports from September indicated that Intel and SK Hynix are exploring U.S. memory production, which could challenge Micron’s domestic dominance, though current market sentiment remains bullish on supply constraints.

Why it matters

The alignment of pricing pressures from Nvidia and long-term supply forecasts from SK Hynix suggests that Micron’s current valuation may undervalue its sustained growth potential. If memory prices continue to rise as indicated, Micron’s low forward earnings multiple could attract investors seeking exposure to the AI infrastructure boom, despite historical cyclicality in the memory sector.

What to watch

Micron will release its fiscal fourth-quarter earnings on September 30. Investors will scrutinize whether the company can maintain high margins and revenue growth amid the reported 'extreme' memory pricing conditions. The outcome will determine if the current valuation gap between Micron and broader market indices narrows or widens.