Micron and Sandisk Lead the Memory Market. 1 Stock Has Far Greater Upside.

Shares of Micron Technology and Sandisk have soared 280% and 457%, respectively, over the past year as demand for memory processors in data centers jumped.

Spending for artificial intelligence (AI) infrastructure isn't slowing down right now -- as Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) recent quarterly results show -- and that's great news for Micron and Sandisk as they continue to benefit from a booming memory market.

But as impressive as the rise of Micron and Sandisk has been, the lesser-known SK Hynix (NASDAQ: SKHY) could have more upside potential. That's because the company holds a leading position in the most in-demand types of memory processors, and its customers are already buying up all available memory.

Here's why putting some money toward SK Hynix stock now could be a smart move.

Image source: The Motley Fool.

SK Hynix just had a fantastic quarter

SK Hynix recently released its third-quarter results, and the company's phenomenal growth showed just how much the company is benefiting from the artificial intelligence boom.

Revenue rose 328% to $78.9 billion, while the company's operating profit jumped 632% to $62.3 billion. Those increases came as SK Hynix's customers exhausted the company's memory supplies, and management noted that more than 50% of its 2027-2028 production capacity is already tied up in long-term contracts.

That's a great problem to have, and one reason SK Hynix is in such a good position is that it sells memory products across high bandwidth memory (HBM), dynamic random-access memory (DRAM), and NAND flash memory.

SK Hynix is the undisputed leader in HBM memory with a 50% market share. That's especially important right now because HBM is the most widely used memory in data centers. For reference, Micron is also a player in this space but holds just 18% of the market, and Sandisk doesn't sell any HBM.

Meanwhile, DRAM and NAND are also in high demand for certain data center needs, and SK Hynix holds 25% market share in DRAM and 19% in NAND, trailing only Samsung Electronics in both categories and ahead of both Sandisk and Micron.

These strong market positions, paired with booming AI investments, have led to unprecedented growth for SK Hynix and to an impressive 80% operating margin in the third quarter.

Why SK Hynix could continue climbing

Wall Street analysts have an average price target of $260 for SK Hynix stock, representing 71% upside from its current price as of this writing.

And while there's no guarantee the company's share price will climb, SK Hynix is clearly tapping into significant and persistent growth trends in the memory market. Consider that the latest Bank of America estimates show that tech companies' data center investments will more than double between now and 2028, reaching $2.1 trillion.

Some of that spending will go directly to memory processors, and it's part of a larger trend among AI cloud companies as they expand their data center capacity to meet demand. Alphabet was the latest company to show that AI spending isn't slowing, with management committing up to $205 billion in capex this year. Alphabet has benefited from the spending as its Google Cloud sales more than doubled to $30.7 billion in the third quarter.

What's more, SK Hynix's leadership says soaring memory demand could last over the next several years. Its leadership said in a press release that a "virtuous cycle has taken hold" in which productivity gains from AI are boosting infrastructure spending, which in turn drives further productivity gains and more spending.

The result is that SK Hynix's management expects memory demand to outstrip supply through 2030. For tech investors looking to tap into the memory market with a clear leader and seeking a stock with significant upside as sales and earnings rise, SK Hynix looks like a good buy right now.

Bank of America is an advertising partner of Motley Fool Money. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Micron Technology. The Motley Fool has a disclosure policy.