Micron (MU) and Sandisk (SNDK) were in the spotlight on Wednesday as investment firm BNP Paribas said it sees memory pricing continuing to surge on the back of heavy demand from artificial intelligence.
“Our analysis of CQ1 contract prices of 50+ DRAM SKUs and 75+ NAND SKUs leads us to estimate overall DRAM ASPs can advance 90% Q/Q in CQ1, followed by a 6% Q/Q increase in CQ2 as increasing AI server demand is driving a wider supply-demand imbalance that’s exerting upward pricing pressure,” analyst Karl Ackerman wrote in a note to clients. “For NAND, we estimate CQ1 prices could increase 55% Q/Q, followed by 5% Q/Q increase in CQ2 predominantly driven by supply-side dynamics as NAND suppliers continue to shift capacity to enterprise storage products while remaining prudent on capacity additions.”
Ackerman has a $500 price target on Micron and a $650 price target on Sandisk.
Delving deeper, Ackerman pointed out that February spot pricing was strong, which, given the correlation between spot pricing and future contracts, bodes well for the industry as contract renewals come up.
“During upcycles, DRAM and NAND spot prices tend to be at a premium to contract prices,” Ackerman explained. “February pricing suggests consumer DDR4 spot prices surged 11% M/M (1284% Y/Y) to $21.93/GB compared to contract prices increasing 7% M/M (688% Y/Y) to $12.17/GB, representing a premium of 80%. Similarly, consumer DDR5 spot prices increased 9% M/M (673% Y/Y) to $19.13/GB compared to contract prices up 3% M/M (384% Y/Y) to $11.04/GB, representing a 73% premium.”