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Citi predicts there’s strong growth ahead for memory chipmakers, driven by rising demand for artificial intelligence applications. The Wall Street bank estimates that specialized memory and storage products meant for AI chips will claim a greater share of the total market, reducing volatility in the sector. Inventory levels for memory chips, such as generic DRAMs, reached multi-year highs in the first quarter of 2023. Such high stock levels typically push down manufacturers’ pricing power. Citi estimates inventories have finally bottomed out after falling by a third since the start of last year. The investment bank now expects earnings at chipmakers to rise as the market recovers and diversifies to produce more higher-end and complex chips for AI applications. “We expect memory products to become semi-customized as AI memory products lead to increased product diversification and complexity going forward,” said Citi analysts led by Peter Lee in a note to clients on Jan. 1. “As such, the memory market will likely develop in the direction of higher product optimization in order to meet customer needs, similar to the foundry market.” Citi told investors that the stocks listed below would benefit from the trend. Two specialized memory chips, high bandwidth memory (HBM) and multi-ranked buffered DIMMs (MRDIMM), will be widely adopted thanks to their suitability in AI applications, according to Citi. HBM provides more bandwidth to accelerate parallel computing, while MRDIMM supports expanded memory capacity. Citi expects these chips to grow from 3.8% of total DRAM shipments in 2024 to 8.8% in 2027. SK Hynix and Micron are both likely to benefit from growth in these “semi-customized” memory chips, according to Citi. The investment bank expects SK Hynix and Micron Technology shares to rise by 63% and 11%, respectively, over the next 12 months. AI processing is also moving beyond centralized server farms into consumer devices like PCs and mobile phones. Citi predicts new memory chips will emerge to enable on-device AI, offering low power draw and high bandwidth. Dell is also one of the most “active” companies developing next-generation memory chips for thin laptops called “Compression Attached Memory Module.” Citi expects shares of the PC maker to rise by 9.8% to $84 over the next 12 months, aided by this trend.
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