According to Jefferies Financial Group Inc., the significant prior gains in the memory sector have led to a recent, reasonable consolidation phase. However, the pullback over the past few days does not signal a complete reversal of the massive rally seen in memory stocks over the last several months.
Analyst Christopher Wood stated in a research report released on Thursday that while the market is experiencing a phase of temporary fatigue with the AI theme, there is no expectation of a weakening in demand for computing power. He believes memory chip company stocks still possess room for continued upward movement.
He wrote in the report: "As long as major corporations continue to escalate the AI capital expenditure race, the beneficiaries will be the 'picks and shovels' sector—the upstream vendors profiting from the capital spending, rather than the companies investing in AI applications. Since the beginning of 2023, the four largest hyperscale cloud providers' stock prices have collectively risen 180%; while the three memory leaders—Micron, SK Hynix, and Samsung Electronics—have surged by as much as 760%... From a long-term investment perspective, even if the cost per token for AI computing power declines significantly, demand for computing power can still sustain growth. Therefore, we are more optimistic about DRAM memory manufacturers."
SK Hynix is scheduled to officially list on the Nasdaq stock exchange on Friday.
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