Micron Technology Inc.’s (NASDAQ:MU) and SK Hynix Inc. (NASDAQ:SKHY) are two of the hottest stocks on the market courtesy of the ongoing shortage in the memory chip industry. The former is up by more than 200% year-to-date, as the ongoing data center buildout creates strong demand for its products. As if these gains weren’t enough, Micron is also part of a list of stocks that could go to the Moon (figuratively, of course). In his morning appearance on Friday, CNBC’s Jim Cramer discussed the impact that Japanese firm Toshiba’s announcement could have on the memory companies:
“Micron, very low indirect impact. . .very little Micron, very little Sandisk. Low SK hynix, which is why SK hynix is now up. And Samsung low and indirect. So, those who are selling Micron on this, this is like selling, you see a lot of sedans coming from Ford so you sell your F150 truck. It is not analogous.
“I think Ben has a beat on Micron, like very few people, he’s been right the whole way. So I think he’s going to be right again. . .Sanjay I hope will come on the show, Sanjay Mehrotra, the CEO, announce the buyback and I think it could be bigger than any other buyback ever. Including NVIDIA’s. They can buyback, I don’t know, he’s using what, five to eight percent? I think he’s lowballing on that. I think that it could be as much as 10% over time. They’re building this giant project near Syracuse in New York so they can’t just run the table and also do that. But I have to tell you that, when it comes to the non-cyclical nature of Micron I’ve never seen anything like it. We sat down at lunch and I said, Sanjay, you’re no longer a cyclical company, you’re a secular growth company, his first reaction was, yeah, with a six multiple, it doesn’t make sense.”
For Micron, the sustainability of the AI buildout and the continued demand for memory chip products are at the center of the debate. One bullish believer, as Cramer discussed, is Ben Reitzes of Melius Research. In recent coverage, Reitzes set a whopping $2,200 share price target for Micron. The analyst believes that the multiple for Micron, which trades at a forward P/E of 7, has room to expand and touch those of compute storage companies, which trade around the low to mid 20s. Among the factors behind Reitzes’ optimism for Micron are long term agreements, which inject visibility into demand. Yet, even though Cramer’s “never seen anything” like Micron, the stock didn’t make it into our list of the 10 Blue Chip Stocks Jim Cramer is Crazy About.
Looking at growth, it’s no wonder that the bulls are excited about Micron. The firm’s latest quarter saw it grow revenue by a whopping 379% and gross margins by an unbelievable 41 percentage points to 87%. As if this weren’t enough, non-GAAP diluted earnings per share sat at $33.42 compared to the year-ago quarter’s rather paltry $3. Naturally, Reitzes and Cramer both have strong expectations from Micron. At the component level, Micron’s DRAM business, which accounts for 73% of the total revenue, grew by 343% annually while its NAND business grew by 526% to $14.10 billion.
Crucially, for the bullish camp, not only did Micron reveal that its capacity for HBM4 memory chips was completely sold out for 2026, but the firm also secured $32 billion in supply commitments for its memory products in its fiscal Q4. Additionally, the firm’s backlog jumped to $150 billion in the quarter up from the previous quarter’s $100 billion. Both these figures inject long term visibility into the firm and support the narrative that Micron is, as Cramer remarked, “a secular growth company.”
Yet, to fund this growth, the firm has to invest aggressively. Micron has allocated a whopping $200 billion in capital expenditure to beef up its capacity to meet customer demand. Herein lies the double edged sword, as while Mehrotra appears to have allocated the spending on the firm assumption of secularity, it also exposes Micron to the historic risk of the semiconductor industry’s overcapacity problem. Yet, if the firm does not expand production, it risks losing its $150 billion backlog to other players in the memory market, notably Korea’s SK hynix. Not to mention, the forward P/E of 7 still prices Micron as a cylical company as opposed to NVIDIA whose stock trades at a forward P/E of roughly 25.
In terms of revenue, SK hynix is at par with Micron courtesy of its fiscal Q2 revenue of roughly $54 billion. However, Micron is the faster growing firm as Hynix’s revenue grew by 257% in its Q2. Additionally, according to Counterpoint Research, SK hynix commanded a 25% share of the global DRAM market in Q2 compared to Micron’s 24%. However, in Q1, the Korean firm’s share was 29% while Micron had captured 22% of the pie, to indicate that Micron is growing its market presence and Mehrotra is right in allocating billions to capital expenditure. For both, Samsung continues to loom particularly as the company aims to rely on logic chip processes to manufacture next-gen HBM4 memory’s base die and secure a technology advantage.
SK hynix’s valuation, at a forward P/E of 5.4 is even lower than Micron’s and suggests that the market might be pricing in a cyclical peak for the memory industry and a memory price normalization on the back of extensive capital expenditure. The multiple also implies a yield of 18.5% which is rather high compared to current interest rates and the S&P’s historic yields. Looking at hedge funds, 184 funds had disclosed a stake in Micron in Q2 for a sharp jump over Q1’s 154. Short interest as a percentage of float is muted.
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