AI Boom Keeps Memory Chip Makers in Sweet Spot, Says Expert

Micron Technology (MU) said on Wednesday that customers including Nvidia (NVDA) had committed $22 billion to lock in supplies of memory chips, highlighting huge growth in five-year "take-or-pay" deals that require clients to either buy its chips or hand over cash.

The comments underscore the growing importance of memory chips in the artificial intelligence supply chain, where demand has surged alongside the need for greater computing power.

Details on Memory Chip Demand

"What's different about Micron, SanDisk, Western Digital, those types of names that are doing so well, is that they're memory chips. You have to have memory specifically DRAM or H-band memory if you're going to have enough computing power to do all the computations. That is nothing if you don't have memory to transfer it from one place to another," said Mulberry.

Investment Context

That dynamic has helped fuel investor interest in memory-chip makers, particularly as AI-related demand continues to outpace available supply.

"So if I'm looking at sales trading at five times, but the demand went up by 12 times, this is actually still a good buying opportunity for a company like Micron."

What This Means for Investors

The statements indicate that memory chips have become a critical component in the AI revolution, potentially supporting valuations of companies like Micron. However, investors should monitor the companies' ability to ramp up production to meet surging demand.