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Memory Stocks Swing Wildly: Can AI and HBM Break the Traditional Cycle?

Memory stocks rebounded broadly on Thursday, with $SK hynix (SKHY.US)$, $Seagate Technology (STX.US)$, $SanDisk (SNDK.US)$, $Western Digital(WDC)$  , and $Micron Technology(MU)$   all moving higher.

The sector had been under pressure in recent sessions. On Wednesday, Treasury yields fell sharply and SK Hynix announced a massive share buyback, yet memory stocks still gave up early gains. The muted response to positive catalysts has brought one key question back into focus:

Is the memory cycle approaching a peak, or are AI and HBM extending the traditional memory cycle?

So far, the fundamentals still provide meaningful support for the latter.

Supply Remains Tight, With 2028 the Bigger Test

The strongest support still comes from supply and demand.

TrendForce expects DRAM supply to remain tight in 2027, with HBM's share of DRAM wafer input rising from about 22% in 2026 to 30% in 2027. Samsung, SK Hynix and MU are all increasing CapEx, but much of the spending is going toward HBM, advanced nodes and new fabs, which take time to ramp.

There are few clear signs of excessive supply expansion yet, with 2028 shaping up as the more important test.

As new capacity comes online, supply could loosen if AI CapEx growth slows. If AI demand remains strong, however, much of that additional capacity could still be absorbed.

Pricing Power Remains Strong as AI Customers Keep Buying

DRAM price increases have moderated from the extreme pace seen earlier, but memory producers still hold considerable pricing power.

Traditional consumer electronics customers are already feeling the pressure. Apple has explored alternative suppliers including CXMT, while recent U.S. pressure to avoid Chinese memory chips has further limited its sourcing options.

AI and data-center customers are behaving differently.

Public data still point to strong AI and data-center demand, while memory suppliers are increasingly using long-term agreements to secure volumes and pricing. Analysts also continue to see robust AI/data-center spending, with tight supply and longer contracts supporting memory pricing.

This marks an important shift:

Consumer electronics customers are becoming more price-sensitive, while AI customers remain more focused on securing supply.

As long as AI demand continues to absorb capacity, weaker demand from traditional consumer electronics could have a smaller impact on the overall memory cycle.

SK Hynix's Massive Buyback Strengthens Shareholder Returns

SK Hynix plans to spend about 40 trillion won to repurchase and cancel roughly 3.3% of its shares. Assuming net income remains unchanged, the lower share count alone would mechanically increase EPS by about 3.4%.

More importantly, SK Hynix is able to fund such a large buyback while continuing to invest heavily in HBM and new fabs, highlighting the strength of the industry's current earnings and cash flow.

SKHY led Thursday's rebound, while MU, SNDK, WDC and STX also moved higher, suggesting buying interest has spread across the broader memory sector.

Can This Cycle Break the Traditional Memory Pattern?

Using MU as a historical proxy for the broader memory cycle, the stock peaked roughly three to four months before DRAM prices and EPS topped in 2018. A similar pattern emerged in the 2021–2022 cycle, when the stock formed a major high while earnings continued to rise.

The biggest difference this time is AI and HBM.

HBM consumes significant wafer capacity, while AI servers continue to drive higher memory content. AI customers are also much less price-sensitive than traditional PC and smartphone buyers. Together, these factors are extending the period of tight supply.

That leaves the market with a bigger question:

Are AI and HBM simply creating a stronger memory upcycle, or are they raising the industry's long-term earnings power?

If AI demand continues to absorb new capacity coming online from 2028 and the three major suppliers maintain strong pricing power, the industry's traditional cycle of rising prices, capacity expansion, oversupply and falling prices could become less severe.

What to Watch Next

Three indicators matter most from here: 2027–2028 earnings estimates, DRAM pricing and AI CapEx.

All three remain supportive for now. AI customer behavior will be particularly important. Continued competition for supply and long-term contracts would signal that memory pricing power remains intact. A meaningful reduction in orders, shorter contract commitments or slower AI server deployments would be more significant signs of a demand inflection.

Bottom Line

The memory industry has entered an important test for this upcycle, but fundamentals still favor the bulls.

Supply remains tight into 2027, while the larger wave of new capacity is concentrated in 2028. Traditional consumer electronics customers are starting to push back against high prices, but AI and data-center customers continue to absorb expensive memory.

Whether this cycle can break from the traditional memory pattern ultimately comes down to two questions: Can AI demand continue absorbing new supply, and can the major memory producers maintain their pricing power?

For now, neither condition has shown clear signs of weakening, leaving room for MU, SKHY, SNDK, WDC and STX to recover further after the recent pullback.

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