T. Rowe Price's Rizzo: The entire data memory industry is in an 'extreme shortage' right now
Speakers
Dominic Rizzo
— Investment Professional, T. Rowe Price
Summary
Dom Rizzo, portfolio manager at T. Rowe Price, says the data memory industry is in an extreme shortage across DRAM and NAND, with tightness across the supply chain and inelastic demand. He has primarily allocated to SK hynix because of its high-bandwidth memory leadership, but favors semiconductor capital equipment as the best way to play both memory and logic cycles. He highlights ASML as reasonably valued and early in its move, while expressing skepticism about Pure Storage and NetApp. He also notes Samsung is a situation-dependent holding.
- Rizzo says DRAM and NAND memory are in extreme shortage with tight supply chain conditions.
- He notes inelastic demand and 50-80% quarter-over-quarter memory price increases.
- Contract timing means earnings impact may take several quarters to play out.
- SK hynix is the strategy's primary memory allocation due to HBM leadership.
- Semiconductor capital equipment is favored as the best way to play memory and logic cycles.
- ASML is cited as reasonably valued and just beginning to move higher.
- Rizzo is skeptical of Pure Storage and NetApp's value-add versus NVIDIA's systems approach.
- Samsung is mentioned as a situation-dependent core memory holding.
Ideas
Memory industry faces extreme shortage across DRAM/NAND.
Rizzo says the entire memory industry is in extreme shortage right now, whether DRAM or NAND, with tightness across the entire memory supply chain. Demand is inelastic, memory prices are up 50-80% quarter-over-quarter, and because many contracts were written six months ago, the earnings impact will take a few quarters to play out.
Hynix is top play on HBM leadership.
Rizzo's strategy is primarily allocated through SK hynix because of its leadership in high-bandwidth memory. He sees tightness across the entire memory supply chain and expects memory and logic to continue converging, making Hynix a key beneficiary of the memory shortage.
Semi capital equipment plays memory and logic.
Rizzo thinks the best way to invest in the memory theme right now is semiconductor capital equipment, because the memory upcycle is always coupled with a logic upcycle and semi capital equipment benefits from both. It also avoids some of the boom-bust risk of core memory players.
ASML reasonably valued, early in upcycle.
Among semi capital equipment names, ASML is specifically cited as having just started its move higher and still trading at relatively reasonable valuations. Rizzo expects it to benefit from the memory upcycle and the coupled logic upcycle.
Skeptical Pure Storage and NetApp value-add.
Rizzo says he has always struggled with Pure Storage and NetApp because he is skeptical of their ability to add value on top of memory/storage, especially as NVIDIA attacks every problem from a systems architecture perspective. He says it remains to be seen whether they can sustain that value-add.
Owns Samsung as core memory exposure.
Rizzo indicates they own Samsung as a core memory player, with the position depending on the situation, while he tries to navigate different markets responsibly. It is part of the firm's broader memory exposure alongside Hynix, though he emphasizes semi capital equipment as the best way to play the memory and logic cycles.
