To The Moon

The memory trade is heating up, but the next test is whether strong industry results can translate into another earnings surprise.

On Wednesday, SK Hynix surged 13.30%, Micron gained 5.86%, and SanDisk rose 7.66%. The rally followed record results from SK Hynix and strong preliminary guidance from Samsung, strengthening expectations that AI demand is supporting a broader memory-cycle recovery.

SK Hynix reported KRW 104.6 trillion in revenue and KRW 83.3 trillion in operating profit. Samsung, meanwhile, guided for KRW 195 trillion in revenue and KRW 107.4 trillion in operating profit. These are Samsung’s preliminary figures, not final results.

The market is now looking to SanDisk, which is scheduled to report early Friday Beijing time.

1. SanDisk: Can earnings beat elevated expectations?

The figures circulating ahead of the report put consensus revenue at $10.85 billion and EPS at $47.15, both reportedly above company guidance. These estimates should be checked against the latest company guidance and analyst consensus before being treated as confirmed.

If expectations are already high, simply delivering solid results may not be enough. Investors will want to see whether NAND pricing, product demand and margins are improving faster than anticipated.

2. Is AI demand lifting the entire memory market?

AI infrastructure requires more than advanced processors. It also needs high-bandwidth memory, conventional DRAM and substantial storage capacity.

SK Hynix benefits from its HBM exposure, while SanDisk is more directly tied to NAND flash storage. Micron has exposure to both memory and data-centre demand.

Their businesses are different, but improving pricing and demand across several memory categories would provide stronger evidence of an industry-wide recovery than a rally driven by one product segment.

3. What could derail the rally?

The biggest risk is that share prices move ahead of the underlying financial results.

Memory is a cyclical industry. Higher prices can boost margins quickly, but stronger profitability can also encourage competitors to expand capacity. If supply eventually catches up with demand, pricing power may weaken.

Investors should therefore look beyond headline earnings and watch:

• Gross margins: Are higher selling prices translating into stronger profitability?

• Guidance: Does management expect demand and pricing strength to continue?

• Inventory and supply: Is demand absorbing available production, or is supply beginning to catch up?

• Cash flow: Are improved earnings translating into cash after capital expenditure?

The key takeaway

Samsung’s guidance and SK Hynix’s results have strengthened the bullish case for memory stocks. But SanDisk’s report could help determine whether the rally has further fundamental support or whether expectations have become too demanding.

A genuine continuation of the cycle would require more than one strong quarter. Sustained pricing, healthy margins and confident forward guidance would provide more convincing evidence that AI-driven memory demand has room to grow.

For discussion purposes only. Not financial advice.