Micron Technology, Sandisk, and Western Digital stocks rose Wednesday. Investors are piling back into the memory and storage trade, relieved by the U.S.-Iran cease-fire.
All eyes are on future price rises for the hardware.
Micron was up 7.7%, while Sandisk gained 9.9%, Seagate Technology jumped 5.9%, and Western Digital rose by 8.6%. The S&P 500 was up 2.5% and the Dow Jones Industrial Average rose 2.9%.
The announcement of a two-week cease-fire deal -- subject to the reopening of the Strait of Hormuz -- has been taken as a signal to rush back into momentum trades, above all the play on the need for memory chips and hard drives for artificial-intelligence infrastructure.
There appears to be no letup in the demand in the near future. Analysts at UBS think prices for double data rate (DDR) memory rose an average 95% in the first quarter of the year from the preceding quarter, while NAND flash memory prices rose 80%. They expect DDR prices to go up a further 37% in the second quarter and NAND prices to rise 40%.
That's in line with forecasts from KeyBanc that prices for DRAM and NAND memory will increase by between 30% and 50% in the second quarter.
The all-important question is how long such price increases can last. Companies like Dell Technologies and HP Inc. have already announced they are raising prices on products to offset some of the margin pressures these cost increases are expected to have. Meanwhile, output of memory chips is expected to increase significantly from the middle of next year.
However, the UBS team expects the cycle of higher prices can continue until late 2027. Additionally, they think the rise of long-term supply agreements could see manufacturers escape the type of crash seen in previous memory-chip cycles.
"[Long-term agreements] should lead to lower peak memory contract pricing, and higher trough levels, in narrower bands than otherwise. We believe the main focus for those is DDR," UBS analyst Nicolas Gaudois wrote in a research note.
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