Robust demand for memory products driven by artificial intelligence (AI) is significantly benefiting key players in the memory industry. Recent insights from market research firm Yole Group indicate that industry revenue experienced an astounding 78% growth in 2024, reaching an impressive $170 billion. This upward trajectory is expected to continue into 2025 with an estimated revenue increase to $200 billion.
The surge in demand for high-bandwidth memory (HBM) utilized in AI server chips is creating a notable supply shortage within the memory sector, consequently driving up prices. Companies like Micron Technology are witnessing unprecedented revenue growth amidst these favorable market conditions. Micron reported a revenue increase of 57% year over year, totaling $13.6 billion in its latest quarter, while its non-GAAP earnings soared nearly 2.7 times from the prior year. The company anticipates a continuation of this growth trend in the upcoming quarter, fueled by favorable supply-demand dynamics.
Given the attractive stock valuation of Micron, the company is viewed as one of the best opportunities to leverage the expanding memory market through 2026 and beyond. Additionally, other significant players in the memory industry such as Lam Research are poised to benefit from the ongoing market expansion as well.
Strong demand for AI-centric HBM chips is leading to an influx of orders that manufacturers are struggling to fulfill. Micron CEO Sanjay Mehrotra indicated that bit shipments in the dynamic random-access memory (DRAM) segment are projected to rise in the low-20% range for 2025, with a similar increase anticipated for the new fiscal year. However, the company has markedly revised its HBM revenue forecasts; now predicting that this segment will generate $100 billion in revenue by 2028, a substantial increase from the previous expectation of $35 billion in 2025.
The upcoming growth in HBM revenue far exceeds forecasts for memory bit shipment increases, likely leading to further price hikes. To address the supply-demand imbalance, companies including Micron are ramping up capital expenditures to enhance production capacity. Micron has increased its fiscal 2026 capex budget to $20 billion, a 45% rise from fiscal 2025. Competitors like Samsung and SK Hynix are also bolstering their production capabilities, with Samsung planning a 50% increase in HBM capacity and SK Hynix fast-tracking its HBM production timeline.
Lam Research, a critical supplier of memory manufacturing equipment, is also reaping the benefits of this heightened spending within the sector. The company’s stock saw a remarkable 143% increase in 2025 and remains an attractive buy at 11.5 times sales and 36 times forward earnings. Lam’s revenue grew by 28% year over year in its latest quarter, reaching $5.32 billion, with earnings jumping 44%, largely attributed to robust investments in HBM.
CEO Tim Archer expressed confidence that memory and semiconductor equipment spending will remain strong driven by AI-related demands. Lam Research projects that for every $100 billion invested in data centers, an additional $8 billion in wafer fabrication equipment spending is required. Furthermore, conversion of existing manufacturing facilities for advanced chip production could also expand Lam’s total addressable market by roughly $40 billion in the coming years.
Anticipating revenue of $21.3 billion for the current fiscal year, Lam Research expects a 15% year-over-year increase, with growth projections remaining healthy for the next few years. As the company capitalizes on the expanding addressable market and drives production to meet demands, it is becoming a compelling option for investors looking to tap into the burgeoning AI sector. Overall, Lam Research stands out as a top stock to consider in light of increased spending on memory equipment and the overall rise in semiconductor investments.
