For the second day in a row, Micron (MU +4.80%) stock moved higher on Thursday, up 3.7% through 10:30 a.m. ET. For the second day in a row, the reason is DRAM high-bandwidth memory (HBM).
And more precisely, how the laws of supply and demand link Micron's profits to HBM supply.
Image source: Getty Images.
What's going on with HBM and Micron?
This story is a bit complex, so let me unravel it for you. Today's news starts at Cisco Systems (CSCO +0.35%), which reported strong earnings last night, but warned the high cost of computer memory may cut into its profits in future quarters. This tallies with recent analyst reports describing unprecedented tightness in the market for DRAM memory chips generally, and HBM in particular.
Responding to this tightness -- and to the high prices it's creating -- Micron rival Samsung began shipping its latest "HBM4" fourth-generation chips yesterday in an effort to cash in. At the same time, rival SK Hynix, which owns "overwhelming" market share in HBM, is also working to increase HBM production.
Last but not least, Micron, too, says it has begun high-volume production of HBM4.
NASDAQ: MU
Key Data Points
Is Micron stock a buy?
And there you have it, folks: The reason why Micron stock is going up... but also the reason that Micron stock might go back down again.
On the one hand, HBM supply is tight and prices are rising, driving Micron's profits higher. On the other hand, everyone sees this happening, and they're all rushing to increase production and capture those higher profits. Problem is, the very fact that everyone's boosting production could eventually end the supply deficits -- and push prices back down again.
The more things change, the more they stay the same. The semiconductor stock remains intensively cyclical, and the boom times for Micron won't last forever.
