AI Surge: Memory Stock Poised for 42% Jump in 2024

Published Date: 15/07/2024

Lam Research's strong ties to the booming memory market, driven by artificial intelligence, could lead to a big upside in July.

The semiconductor industry is experiencing a resurgence in 2024, driven by growing demand for chips from various applications such as smartphones, personal computers, and data centers. Within this industry, the memory chip market is witnessing an even more impressive growth trajectory. According to market research firm Gartner, memory spending is expected to jump 66% this year.

Micron Technology, a memory specialist, has been a key beneficiary of this surge in memory sales. Its shares have gained 54% in 2024, and a potential acceleration in its growth could propel it further. Another memory stock that has caught attention is Lam Research (NASDAQ  LRCX), which has clocked healthy gains of 42% so far this year.

The demand for memory deployed in artificial intelligence (AI) chips, known as high-bandwidth memory (HBM), is booming. Micron Technology management has pointed out that its HBM capacity is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of its 2025 supply. This solid demand for HBM explains why memory manufacturers such as Micron are expanding their production capacities.

Lam Research, which generates most of its revenue from selling memory manufacturing equipment, is well-positioned to capitalize on this trend. The company is expected to report year-over-year growth when it releases its quarterly results later this month, driven by strong demand for memory chips. This could translate into more upside for the stock, especially if it reports a solid set of results that beat expectations.

Lam Research Corporation is a leading supplier of wafer fabrication equipment and services to the semiconductor industry. Micron Technology, Inc. is a leading provider of memory and storage solutions. The Motley Fool is a financial services company that provides investment advice and resources to individual investors.

FAQS:

Q: What is driving the growth of the memory chip market?

A: The growing demand for artificial intelligence (AI) chips, known as high-bandwidth memory (HBM), is driving the growth of the memory chip market.

Q: How has Micron Technology's stock performed in 2024?

A: Micron Technology's shares have gained 54% in 2024.

Q: What is Lam Research's expected revenue growth in its upcoming quarterly results?

A: Lam Research is expected to report year-over-year growth of 19% in its quarterly results later this month.

Q: How does Lam Research generate most of its revenue?

A: Lam Research generates most of its revenue from selling memory manufacturing equipment.

Q: What is the estimated compound annual growth rate of spending on DRAM memory equipment through 2027?

A: The estimated compound annual growth rate of spending on DRAM memory equipment through 2027 is 17%.

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