Here's a fun twist on the usual earnings reaction: NVIDIA's latest numbers didn't just move its own stock. They also gave a nice jolt to the companies that make the stuff NVIDIA needs to build its AI chips. We're talking about memory, and it's becoming the quiet bottleneck in the AI boom.
Shares of Micron Technology (MU) and SK Hynix (SKHY) climbed in premarket trading Thursday, riding the wave of NVIDIA's earnings and its growth outlook. The message from the chip giant: AI demand is still red hot, and that means memory is in short supply.
NVIDIA's Outlook Puts Memory in the Spotlight
The memory world is basically a trio: Samsung Electronics (SSNLF), SK Hynix, and Micron. They dominate DRAM, NAND flash, and high-bandwidth memory (HBM), the stuff that AI servers crave. Samsung leads in DRAM and NAND, SK Hynix is the big dog in HBM, and Micron is the major U.S. player in high-performance memory.
Jeff Herbst, a former NVIDIA executive and now founding managing partner at GFT Ventures, put it plainly: AI computing and services demand is outstripping what the memory industry can supply. And he's not just some random commentator; he sits on SK Hynix's CEO Advisory Board.
Tight Supply, Higher Prices, and No Quick Fix
Herbst told CNBC that all three major memory makers are already running at full capacity. The problem? You can't just flip a switch and make more memory. New fabrication plants take years to build and bring online. So, with AI demand still climbing, Herbst expects memory prices to stay elevated for a while.
He also gave a nod to SK Hynix's early bet on HBM, noting the company has said its supply is sold out for at least the next couple of years. That's a good position to be in when everyone else is scrambling for the same chips.
NVIDIA Locks In Memory, But It's Still a Constraint
Herbst revealed that NVIDIA has signed long-term supply agreements with all three memory manufacturers, including SK Hynix. That's a smart move to secure the components it needs. But even with those deals, memory is still a drag on NVIDIA's growth.
He pointed out that NVIDIA's outlook for roughly 70% growth next year suggests supply limitations are holding the company back. Memory isn't the only constraint, though. Herbst mentioned power, water, and land availability as other bottlenecks. But memory is clearly a big one.
So, while NVIDIA's earnings were a win for the AI trade, they also highlighted a less glamorous but critical piece of the puzzle: the memory chips that make it all possible. And for investors in Micron, SK Hynix, and Samsung, that's a good thing.
Price Action: NVIDIA shares were up 6.00% at $222.25, Micron Technology shares were up 3.78% at $973.91 and SK hynix shares were up 4.10% at $164.50 during premarket trading on Thursday, according to market data.
