Micron Technology just got a great signal from one of its key rivals. Shares were climbing after South Korea's SK Hynix reported blockbuster earnings and said memory-chip demand will outstrip supply through to the end of the decade.
Micron shares were up 3.9% in premarket trading. American depositary receipts of SK Hynix were up 7.7% after it reported record revenue and operating profit for a sixth straight quarter on Wednesday.
But the most important line came in SK Hynix's market outlook: "Demand expected to outpace supply through 2030."
That's music to Micron shareholders' ears. Wall Street has generally been pricing in a potential downturn in memory prices after 2028. That's when SK Hynix and Korean peer Samsung Electronics are set to bring multiple new production sites into operation, with a total of seven new memory fabrication and packaging plants set to come online that year according to research firm Trendforce.
SK Hynix's own sales tell a different story. The company said its dynamic random-access memory (DRAM) and high-bandwidth memory supply -- the crucial component for artificial-intelligence servers -- is effectively sold out for the next three years.
Micron shareholders are also likely to be eyeing SK Hynix's pledge to return $75 billion to shareholders this year. Micron will be able to start major stock buybacks from Dec. 9, under the conditions of its 2024 U.S. Chips Act funding.
UBS analyst Timothy Arcuri has argued Micron could start by buying back about $20 billion worth of shares a quarter, rising to around $50 billion quarterly toward the end of its fiscal year 2027, which would be September next year.
Micron has more than tripled this year already but still trades at notably cheap valuation due to concerns about the cyclical nature of the memory market. SK Hynix's figures suggest the memory boom has plenty of runway left.
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