Memory chip pricing cools as SK Hynix, Samsung miss 39% target

Memory chip pricing is climbing more slowly than analysts expected, with SK Hynix and Samsung both missing DRAM price targets last quarter — a warning that Micron's earnings cycle may peak lower than the market anticipates.

Goldman Sachs analysts were looking for 39 percent sequential growth in SK Hynix's DRAM pricing; the company delivered about 30 percent. Morningstar's analysts expected Samsung's DRAM pricing to rise 48 percent; it came in above 40 percent. Both shortfalls point to a pricing environment that is strong but softer than the market had priced in.

SK Hynix still increased DRAM pricing about 30 percent sequentially, and Samsung's DRAM pricing climbed more than 40 percent. NAND pricing rose faster — mid-50 percent for SK Hynix and high-60 percent for Samsung. But Goldman now expects just 19 percent price improvement for the current quarter, and SK Hynix reported slower-than-expected HBM4 shipments last quarter, with management saying it was ramping production in the second half of the year.

The shortfall matters because Micron reports quarterly earnings next month. Micron had covered 20 percent of its DRAM sales and about one-third of its NAND sales with long-term agreements as of last quarter — contracts that lock in pricing for years and cap peak earnings even as they protect against downside.

Long-term contracts cap peak pricing

The memory chip market is dominated by three companies — Micron, SK Hynix and Samsung — and it is deeply cyclical. It takes years for a new manufacturing plant to start producing chips at scale, so a spike in demand can send prices sharply higher. Once additional supply enters the market or demand falls, prices fall, and with higher operating costs, profits fall even more.

The lower-than-expected pricing at SK Hynix and Samsung suggests AI demand may be slowing. That is compounded by SK Hynix's report of slower-than-expected HBM4 shipments last quarter. HBM (high-bandwidth memory, the advanced chips stacked alongside AI processors) has been the fastest-growing segment of the market, and any slowdown there ripples through the entire pricing picture. SK Hynix is a key supplier of AI memory chips to Nvidia.

Perhaps the biggest weight on pricing is the long-term agreements the chipmakers are signing with customers. These contracts lock in pricing for years in advance, leading to lower peak pricing but also protecting against downside risk. They give the chipmakers confidence to build out new manufacturing capacity — SK Hynix is expanding domestic capacity toward a 50 percent share by the end of 2026 and announced new investment plans for advanced packaging and a new NAND production base.

Micron's next report faces a lower bar

Peak pricing is likely to fall short of analysts' prior expectations. While Micron and its competitors could fetch a slightly higher earnings multiple than in past cycles because of long-term pricing stability, the earnings they will be multiplying by will be lower. The potential long-term downside remains: long-term agreements could simply pull demand forward, ultimately leading to a prolonged slide in earnings.

SK Hynix's stock, which debuted on the Nasdaq in July after raising about $26.5 billion in the largest U.S. IPO ever by a foreign company, trades at roughly 3.6 times forward sales. Its shares are more than 14 percent below the first-day high and nearly 26 percent below the all-time peak, and Wall Street's consensus price target points to about 57 percent upside. The company reported lower-than-expected revenue in the second quarter, its first since going public, intensifying concerns that the AI-driven semiconductor boom may be losing momentum.

For Micron investors, the takeaway is that the memory upcycle may be peaking sooner and lower than expected. The stock has been one of the highest-flying in the market this year on the back of the chip shortage, but the pricing data from its two main rivals suggests the next earnings report could disappoint. Investors should watch whether Micron's long-term agreement coverage — already at 20 percent of DRAM and one-third of NAND — keeps climbing, because that will determine how much of the cycle's peak earnings the company actually captures.

This article is for informational purposes only and does not constitute investment advice.