Core Insights - The memory industry is experiencing a cyclical recovery driven by increased capital expenditures from hyperscale companies and demand from AI inference, with historical data suggesting that the industry has not yet reached its peak [5][10] - UBS indicates that demand growth is outpacing supply growth, leading to a projected shortage in the coming year [7] Market Trends - The current memory cycle is reminiscent of past cycles, particularly the rise of cloud computing, with AI inference driving demand [5][7] - Memory stocks have seen an average increase of 178% this year, but to match the peak growth of 160% YoY seen in 2017, contract prices would need to rise by approximately 60% [10] Investment Strategies - Morgan Stanley suggests a more lenient approach to valuations during the upward phase of the cycle and an optimistic outlook on earnings expectations, especially during super cycles [9] - Historical data indicates that memory stocks typically peak 4 to 8 months before earnings peak, suggesting a need for cautious exit strategies [10] Demand and Supply Analysis - The demand and supply model shows that while demand is increasing, supply is not keeping pace, leading to ongoing shortages [12][14] - Inventory levels in the industry are never zero, which means that even in tight supply conditions, there will always be some inventory, affecting pricing dynamics [14]