SK Hynix Sees the Memory Shortage Lasting Through 2030. 2 Memory Stocks to Buy and Hold Until Then.

SK Hynix (NASDAQ:SKHY) thinks the memory chip shortage has over four years left. With record third-quarter results in late October, the South Korean memory maker said it expects demand to keep exceeding supply through 2030, citing how hard leading-edge manufacturing has gotten and how long new plants take to build.

That's a bold call for an industry known for booms and busts. But the boom, at least, shows in the numbers. SK Hynix's third-quarter revenue passed 100 trillion won for the first time, growing 328% year over year to around 104.6 trillion won. Operating profit climbed 632% to around 83.3 trillion won, with an operating margin of 80%.

But investors aren't pricing in a shortage that long. SK Hynix and Idaho-based Micron Technology (NASDAQ:MU) each trade at less than 6 times expected earnings for fiscal 2027. And Micron's shares have dropped about 20% since their record close on June 25.

I think both companies' own numbers make a stronger case than those prices suggest.

Image source: Getty Images.

1. SK Hynix: a forecast backed by contracts

SK Hynix has signed long-term agreements with 14 big customers, including top cloud providers, and it says that volume covers over 50% of its total production capacity for 2027 and 2028. In late July, it had such deals with about 10 customers.

Showing how fast the shortage has boosted sales, SK Hynix's revenue rose from about 52.6 trillion won in the first quarter to 79.3 trillion won in the second and 104.6 trillion won in the third. But the pace is easing. Sequential revenue growth fell from 51% to 32%, and operating profit growth from 61% to 38%.

On top of that, the company plans about 100 trillion won of shareholder returns for 2026, split between dividends and buybacks. It finished the third quarter with net cash of 98.7 trillion won.

At around $162 a share as of this writing, SK Hynix's Nasdaq-listed stock costs about 4 to 5 times its expected 2027 earnings. That price arguably implies profits drop long before 2030.

2. Micron: customers are signing up past 2030

Micron isn't predicting that far ahead. Management expects memory supply to stay short of demand in calendar 2027 and 2028, with conditions tighter than in 2026. After that, it says it can't yet see when the two will get back into balance.

But Micron's contracts reach further. The company has signed 26 strategic customer agreements, which are multiyear take-or-pay deals (the customer pays for its committed volume whether or not it takes delivery). Micron estimates they cover more than 35% of its revenue through 2030, and some now run into 2031. Customers have backed them with $32 billion of financial commitments, largely cash deposits.

Of course, Micron is also earning record margins. In fiscal Q4 2026 (which ended Sept. 3), its operating margin hit about 81%, up from 32% a year earlier, as revenue rose to $54.2 billion from $11.3 billion. Management guided for a record $61.5 billion or so in fiscal Q1 2027.

But this guidance implies sequential growth of around 13%, down from 31% in fiscal Q4.

At about $972 a share as of this writing, Micron's stock costs about 5.5 times the earnings analysts expect for fiscal 2027, which started in September.

Worth holding until 2030?

The 2018 shortage ended quickly. SK Hynix said in its report on 2018 results that the market "rapidly changed" when demand slowed in the second half of that year and the supply shortage was over. Its operating profit shrank 87% the next year, from 20.8 trillion won to 2.7 trillion won. And SK Hynix's 2018 operating margin was 52%, well under the 80% it just reported, so margins may have further to fall this time.

Memory stocks also don't tend to wait for the profit drop. In fiscal 2018, Micron earned a record $14.1 billion in net income. Still, its shares lost around 54% from its late-May 2018 closing high to its December low.

More supply is coming, too. Micron's second Idaho fab is due to begin wafer output in late calendar 2028, and its first New York fab in calendar 2030 -- the back half of SK Hynix's forecast, when the forecast may be most at risk.

But at under 6 times expected earnings, investors are already paying as if today's profits shrink fast. And both companies have customer contracts pointing the other way.

I think both stocks are worth buying and holding until 2030. I'd just go in expecting at least one steep drop along the way.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.