Keithen Drury, The Motley Fool
4 min read
The memory chip market has a history of being extremely cyclical. This can make investors unwilling to pay more for stocks like Sandisk (NASDAQ: SNDK) and Micron (NASDAQ: MU) when the companies are doing well, as the threat of the next inevitable downturn always lurks around the corner. This is why the market often undervalues these stocks relative to their tech sector peers in other niches.
However, we’ve never seen a demand wave for memory like this, and a major change could shift how the industry acts. So, is this time really different?
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Different types of memory have different attributes
There are two primary types of memory chips: DRAM and NAND. NAND flash memory is slower, retains data even without power, and is used mostly for long-term data storage. Both Sandisk and Micron make NAND, which often goes into solid-state drives that are heavily used in data centers.
DRAM can store and transmit data much more rapidly than NAND, but when the power to a DRAM chip is turned off, the data vanishes. This is the type of memory behind the RAM in computers. A subset of DRAM known as high bandwidth memory (HBM) is widely utilized in AI computing devices like GPUs. Micron also makes DRAM. Sandisk does not.
The question of whether “this time is different” for the memory market really depends on which type of memory you’re talking about. When it comes to NAND memory, there isn’t much to distinguish one product from another. SSDs are really just SSDs, give or take a few feature sets. So, unless some innovative technology is developed, pricing in this sector will largely be dictated by supply and demand.
Fortunately, demand for memory isn’t expected to wane for years, as Micron recently told investors that conditions in the memory chip market will be worse in 2027 and 2028 than in 2026. So the NAND market will still be a great place to invest over the next few years.
The DRAM market, especially in HBM, is starting to evolve. Micron recently signed a deal with Nvidia to develop a custom HBM solution for its GPUs. That’s a genuinely transformational change in this industry, as there are likely agreements in place between them that will reduce the commodity-like nature of memory chip pricing. Furthermore, Micron has been entering into strategic agreements with many clients that set longer-term floors and ceilings on memory chip prices. Many of those deals run through 2030 and 2031.
