Memory stocks stretched but still reasonably valued - analyst

[Close-up of Silicon Die are being Extracted from Semiconductor Wafer and Attached to Substrate by Pick and Place Machine. Computer Chip Manufacturing at Fab. Semiconductor Packaging Process.]
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Semiconductor stocks (SMH [https://seekingalpha.com/symbol/SMH]) (SOX [https://seekingalpha.com/symbol/SOX]) are extended but not expensive, Vivek Arya, senior semiconductor analyst at Bank of America Securities, said on Wednesday.

Speaking in a CNBC interview, Arya noted that many semiconductor companies, including memory giant Micron (MU [https://seekingalpha.com/symbol/MU]), are trading at multiples below their historical averages and well under their earnings growth rates.

The analyst highlighted a fundamental shift in the memory market driven by artificial intelligence (AIQ [https://seekingalpha.com/symbol/AIQ]). “AI is creating demand that is growing at four to five times the speed at which the industry can provide supply,” Arya explained. “We have never seen this before.”

This supply-demand imbalance stems from AI’s (AIQ [https://seekingalpha.com/symbol/AIQ]) evolution from simple chatbots to more sophisticated reasoning and agentic systems that require significantly more memory to process and retain context.

High bandwidth memory, or HBM, pricing has surged dramatically—up seven to eight times compared to last year, with Q2 prices rising 60%-70% sequentially. Arya projects continued sequential price growth through year-end, with potential deceleration in early next year as incremental capacity comes online.

However, the analyst emphasized that each new HBM generation—from version three to four to five—requires three to five times more wafers for the same capacity, keeping supply constrained against surging AI demand.

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