The rapid advancement of artificial intelligence (AI) has not only impacted chip stocks like Nvidia but has also brought about significant changes in the dynamic random access memory (DRAM) market. High-bandwidth memory (HBM), once a niche technology, is now experiencing a surge in demand as the preferred memory for training large language models in the era of generative AI. Micron, the leading U.S. DRAM memory stock, has witnessed a 27% increase in shares this year, despite a recent correction of 31%. However, its Korean rival, SK Hynix, an early adopter of HBM, has seen an even higher surge of 43% in 2024.
During SK Hynix’s second-quarter earnings call, management projected remarkable growth for its HBM products in the upcoming year. If SK Hynix’s growth forecasts hold true, Micron’s growth in the coming year could be equally impressive. SK Hynix reported extraordinary AI-driven growth in Q2, with revenues increasing by 32% quarter-over-quarter, equivalent to an annualized growth rate of 200%. Operating-profit margins also expanded significantly, rising by 10 percentage points from the previous quarter to reach 33%. This demonstrates substantial operating leverage as SK Hynix enters a booming cycle.
HBM played a pivotal role in driving SK Hynix’s growth, with an astounding 80% increase over the previous quarter and a remarkable 250% growth over the previous year. However, this growth was limited by advanced packaging-capacity constraints, indicating the potential for even higher numbers. SK Hynix’s management anticipates even greater HBM growth for the remainder of this year. With ongoing capacity expansions and technological advancements, they expect HBM growth to exceed 300% in 2024, accelerating on a year-over-year basis compared to Q2. Furthermore, HBM output is projected to more than double in 2025, following this year’s quadrupling.
To achieve this growth, SK Hynix plans to introduce its HBM3E 12-high product in Q4 of this year, which offers higher memory density than the currently shipping HBM3E 8-high product. The company’s growth trajectory does not end there, as it already has HBM4 technology lined up for shipping in late 2025, likely contributing to further growth in 2026.
While SK Hynix holds an advantageous position as the first-mover in HBM, Micron is rapidly catching up in terms of volume. In fact, from a technological standpoint, Micron has already surpassed SK Hynix. In February of this year, Micron began ramping up production of its HBM3E product, which the company claims is 30% more power-efficient than SK Hynix’s leading product. This claim was later confirmed by Keybanc analyst Jon Vinh, who conducted a channel check in Asia and verified the 30% power reduction in Micron’s HBM3E chips during customer sampling.
Although Micron’s recent revenue growth did not match the acceleration seen by SK Hynix, it is important to note that Micron reported a quarter ending in May, while SK Hynix reported for the end of June. Additionally, Micron’s HBM revenue is still in its early stages, contributing just over $100 million to the company’s $6.81 billion in revenue for the May quarter. However, Micron’s management expects HBM revenue to reach “several hundred million dollars” in fiscal 2024 and “multiple billions” in fiscal 2025. Notably, Micron’s fiscal year ends this quarter in August, meaning HBM revenue is projected to grow from $100 million to “several hundred” million dollars within a single quarter, and then to “multiple billions” within a year. This represents even faster growth than SK Hynix, driven by Micron’s technology leadership and starting from a lower base.
In 2025, Micron aims to achieve a market share in HBM that matches or exceeds its market share in overall DRAM, which currently stands between 20% and 25%. This goal may be within reach, considering that Samsung, the leader in overall DRAM market share, is yet to have its HBM qualified by Nvidia for their top graphics processing units (GPUs). Samsung’s struggles with HBM output or consistency have provided Micron and SK Hynix with an opportunity to forge ahead.
The rising tide of HBM adoption will benefit all players in the memory industry. After enduring one of its worst downturns following the pandemic, the industry is poised to witness skyrocketing profitability into the next year. Both Micron and SK Hynix have reported selling out their HBM capacity for 2024 and most of 2025. Moreover, HBM memory consumes three times the wafer capacity of regular DRAM, and this ratio is expected to increase further with the introduction of HBM4 next year. As investment in HBM diverts capacity from regular DRAM production for other applications, the supply across the entire memory industry is likely to tighten, leading to increased prices and profits for the major players.