- MU
- SKHY
- NVDA
Micron Technology(NASDAQ: MU) has become a major beneficiary of rising demand for memory chips, which has fueled record revenue and earnings growth over the last year. What investors may not fully understand is that Micron isn’t the only company poised to capitalize on artificial intelligence’s insatiable appetite for memory.
If I could own just one AI memory stock for the next five years, my choice would be SK Hynix(NASDAQ: SKHY). Let’s dig into why I think SK Hynix stock deserves a closer look.
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SK Hynix is the leader in high bandwidth memory
Most investors think of Nvidiaand its graphics processing units (GPUs) when they think about AI. These processors wouldn’t be nearly as effective without high bandwidth memory (HBM). HBM allows AI accelerators to access large quantities of information quickly, making it a critical input for training generative AI models.
As Nvidia and other semiconductor designers develop more powerful chip architectures, the memory accompanying these chips needs to be faster, more efficient, and capable of handling larger workloads. This is where SK Hynix stands out.
According to Counterpoint Research, SK Hynix accounted for 50% of global HBM revenue as of the second quarter, nearly as much as <a href="https://myappsplus.com/what-does-the-orange-dot-on-your-samsung-galaxy-watch-mean/” title=”What does the orange dot on your Samsung Galaxy Watch mean?”>Samsung and Micron combined. SK Hynix achieved its market leadership through early investments in advanced memory packaging and manufacturing technologies, giving it a first-mover advantage in the HBM market.
SK Hynix’s tailwinds are durable
One of the biggest risks facing memory manufacturers is the industry’s cyclical boom-and-bust cycle. When demand accelerates, manufacturers expand production. Naturally, supply catches up, prices fall, and profit margins deteriorate.
Advanced AI memory introduces an interesting nuance. The companies designing next-generation AI accelerators need memory suppliers capable of meeting increasingly demanding technical requirements. In turn, this encourages close collaboration between semiconductor designers like Nvidia and memory producers.
SK Hynix is positioned particularly well for this transition. The company began mass shipments of HBM4 during the second quarter, while continuing development of its next-generation HBM4E products. These developments should strengthen its relationships with customers building more powerful accelerated computing systems.
