TLDR:

Citi predicts strong growth ahead for memory chipmakers, driven by rising demand for artificial intelligence (AI) applications. The bank expects specialized memory and storage products for AI chips to claim a greater share of the market, reducing volatility in the sector. Citi also expects earnings at chipmakers to rise as the market recovers and diversifies to produce more higher-end and complex chips for AI applications. The stocks that Citi believes will benefit from this trend include SK Hynix, Micron, and Dell.

Key Points:

• Citi predicts strong growth for memory chipmakers due to rising demand for AI applications.
• The bank expects specialized memory and storage products for AI chips to claim a greater market share.
• Citi believes stocks such as SK Hynix, Micron, and Dell will benefit from this trend.

Citi forecasts that two specialized memory chips, high bandwidth memory (HBM) and multi-ranked buffered DIMMs (MRDIMM), will be widely adopted in AI applications. HBM provides more bandwidth for parallel computing, while MRDIMM supports expanded memory capacity. Citi expects these chips to grow from 3.8% of total DRAM shipments in 2024 to 8.8% in 2027. As a result, SK Hynix and Micron are expected to benefit from the growth in these “semi-customized” memory chips.

Citi also predicts that AI processing will move beyond centralized server farms into consumer devices such as PCs and mobile phones. This will drive the emergence of new memory chips that enable on-device AI with low power draw and high bandwidth. Dell is highlighted as one of the “most active” companies developing next-generation memory chips for thin laptops called “Compression Attached Memory Module.” Citi expects Dell’s shares to rise by 9.8% over the next 12 months, aided by this trend.