Memory Giants Face Crossroads as AI Demand Meets Supply Clarity

Key points

• The Alpha Analyst advises holding both Micron and SK hynix, noting that pricing momentum in NAND has turned and DRAM growth is slowing, making current dips unattractive for new positions.
• SK hynix shares jumped over 7% after Q3 earnings beat, with revenue around 97.1 trillion won and a low P/E ratio of 3.76, reflecting strong AI-driven operational momentum.
• SK hynix is weighing a 16 trillion won ($12B) special dividend from its Kioxia stake and preparing a potential US IPO for its Solidigm spin-off, targeting up to $100B valuation.
• Both companies are well-contracted for 2027, but the next major catalyst will be 2028 supply and capex clarity, not near-term earnings, according to The Alpha Analyst.
• Rosenblatt reiterated a Buy rating on SK hynix, calling the recent selloff overdone and arguing that DRAM demand is structurally improving despite Chinese competition concerns.

Background

Micron shares surged 552% in the past year, reaching approximately $1,070, with forward multiples as low as 6.2x assuming sustained memory shortages. Apple recently warned that memory chip prices are 'unprecedented,' driving a forecasted drop in gross margins. SK hynix previously reported a 632% profit surge in Q3, confirming a sustained memory shortage through 2027.

How outlets are covering it

The Alpha Analyst emphasizes caution, suggesting that rising earnings and buybacks should offset multiple compression but that sideways trading is likely until 2028 visibility improves. Timothy Sykes highlights SK hynix's strong trend and catalysts, including the potential dividend and Solidigm IPO, while noting volatility risks from export controls and Chinese competition. Rosenblatt views the recent pullback as an opportunity, citing structural improvements in DRAM demand.

Why it matters

The convergence of relative advantages between Micron and SK hynix signals a potential shift in the memory sector's dynamics. Investors must navigate between strong AI-driven demand and the risk of future supply increases from Chinese manufacturers, which could erode high margins. The upcoming 2028 supply clarity will be critical for determining long-term profitability.

What to watch

Watch for formal decisions on SK hynix's special dividend and updates on the Solidigm IPO. Monitor 2028 supply and capex announcements from both Micron and SK hynix, as these will determine whether current high margins can be sustained or if new competition will erode them.