Micron and SK Hynix Stocks Surge Amid Memory Chip Shortage

Micron Technology Inc. and SK Hynix Inc. have recently emerged as standout stocks, largely due to the ongoing shortage in the memory chip sector. Interestingly, Micron’s stock has surged over 200% this year, driven by a robust demand related to the buildout of data centers. Additionally, Micron appears on a list of stocks generating significant buzz online. On a recent broadcast, CNBC’s Jim Cramer shared insights regarding an announcement from Toshiba and its potential effects on these memory companies.

“Micron’s impact here is low and indirect… very little effect on both Micron and Sandisk. SK Hynix, too, is seeing minimal effects, which might explain its recent uptick. It’s like deciding to sell your F150 truck just because you see a bunch of sedans rolling out of Ford—it just doesn’t make sense,” Cramer elaborated.

Cramer also praised analyst Ben Reitzes, saying, “He really knows Micron, and I trust his judgment. I’m optimistic that CEO Sanjay Mehrotra will introduce a significant buyback plan, possibly larger than NVIDIA’s. I wouldn’t be surprised if it’s around 10%, despite some current estimates being lower. As they embark on this major project near Syracuse, they can’t just go all out on buybacks, but they certainly have room to maneuver. I’ve never encountered a company like Micron; it feels different. I once sat down with Sanjay and told him he’s no longer just a cyclical player, he’s part of a secular growth story. His reaction? Well, a six times multiple doesn’t seem justifiable.”

For Micron, the crux of the matter revolves around the sustainability of the AI expansion and the ongoing demand for memory products. Reitzes from Melius Research forecasts a remarkable target price of $2,200 per share, indicating that Micron’s valuation could expand significantly, considering its current forward P/E ratio of 7. This seems quite low, especially compared to the valuations of compute storage firms that typically hover in the low to mid-20s range. One of the reasons for his bullish outlook is the long-term agreements Micron has secured, which provide clearer visibility into demand. Nevertheless, despite the glowing remarks about Micron, it hasn’t made it onto Cramer’s roster of favorite blue-chip stocks.

Looking at the growth figures, it’s pretty clear why many investors feel optimistic about Micron. In its latest quarter, the company reported an astonishing revenue increase of 379% alongside a 41-point jump in gross margins to 87%. Non-GAAP diluted earnings per share also soared to $33.42, a stark contrast to the mere $3 from the same quarter last year. Reitzes and Cramer both seem to have high expectations for Micron. Notably, the DRAM segment, which contributes 73% of overall revenue, increased by 343% year-over-year, while the NAND business surged 526% to $14.10 billion.

Importantly, for those leaning bullish, Micron disclosed that its HBM4 memory chip capacity was entirely booked for 2026 and noted $32 billion in supply commitments during its fiscal Q4. Additionally, its backlog rose to $150 billion from the previous quarter’s $100 billion, providing very solid visibility for future growth and reinforcing the idea that Micron, as Cramer said, is on a growth trajectory.

However, to support this growth, Micron needs to invest heavily. The company has earmarked about $200 billion for capital expenditures to enhance its capacity and meet customer needs. This situation poses a bit of a risk; albeit Mehrotra might be banking on ongoing growth, it does make the firm susceptible to the semiconductor industry’s notoriously cyclical overcapacity issues. Yet, if Micron holds back on production, it could lose valuable market share—especially with SK Hynix nipping at its heels. Interestingly, Micron’s forward P/E of 7 still categorizes it as cyclical, whereas NVIDIA trades at around 25.

Regarding revenue, SK Hynix’s recent fiscal Q2 performance was comparable to Micron’s, posting about $54 billion in revenue, but Micron is showing quicker growth—Hynix’s revenue increased by 257% in Q2. According to Counterpoint Research, in Q2, Hynix held a 25% share of the global DRAM market, just slightly edging out Micron’s 24%. Interestingly, in Q1, Hynix’s share was 29% while Micron had 22%, indicating Micron’s increasing traction in the market—a trend that supports Mehrotra’s decision to invest billions in capital expenditures. Samsung, meanwhile, remains a looming competitor as it gears up to utilize logic chip processes for its next-gen HBM4 memory innovations.

The valuation of SK Hynix, positioned at a forward P/E of 5.4, is even lower than Micron’s, implying that the market is perhaps anticipating a cyclical peak for memory prices amid extensive capital investments. This metric suggests an attractive yield of 18.5%, which seems quite appealing compared to current interest rates and historical S&P yields. In terms of institutional interest, there’s been a notable increase among hedge funds, with 184 funds reporting stakes in Micron during Q2, a significant uptick from 154 in Q1. Short interest appears to be relatively low as well.

In summary, while there’s recognition of both the risks and opportunities associated with these investments, it’s becoming increasingly apparent that some stocks related to AI are potentially more promising in terms of returns and downside protection compared to traditional options.