After flying higher during the first few months of the year, memory makers such as Micron Technology Inc. (MU) , Western Digital Corp. (WDC)  (also a big hard drive maker, of course) and SK Hynix Inc. have turned into battleground stocks in recent months. Bulls upbeat about continued industry strength and the impact of new hardware and chip launches have squared off against bears worried that the current boom cycle will soon meet the fate of all the ones preceding it.

For the time being, it looks like bulls -- with assists from Apple Inc. (AAPL) , Intel Corp.  (INTC) and Samsung -- are set to gain the upper hand. But with memory makers dialing up their capital spending and some customers responding to higher memory prices with their own price hikes, it's worth keeping a close eye on how conditions might look once the industry makes it past the seasonally strongest part of the year.

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Micron is within $0.50 of a 52-week high of $32.96 (set in June) after seeing a flurry of bullish analyst notes over the last couple of weeks. On August 29th, JPMorgan's Harlan Sur (Overweight rating, $40 target) forecast memory supplies will remain tight "at least for the next few quarters," with data center and networking hardware demand acting as catalysts. And though he expects memory prices will see seasonal declines in early 2018, Sur thinks Micron's margins will continue growing in fiscal 2018 (ends in August 2018) thanks to manufacturing cost reductions.

A week before Sur's note, Baird's Tristan Gerra (Outperform rating, $48 target) reported DRAM pricing is tracking ahead of expectations with the help of "healthy growth in notebooks along with continued double-digit content increase in data centers," and that inventories remain below normal levels.

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Recent DRAM spot and contract pricing data backs up Gerra's commentary. After cooling off a little this spring in the wake of a big 6-month rally, DRAM spot prices have been trending higher again this summer. And contract prices -- less volatile than spot prices -- continue incrementally moving higher. Likewise, NAND contract prices have been rising, and while spot prices have slipped a little this past month, they remain well above where they were to start the year.

The pricing strength follows a Q2 during which DRAM and NAND revenue from top manufacturers respectively grew 16.9% and 8% sequentially, according to research firm DRAMeXchange. Micron reported 92% May quarter revenue growth from depressed year-ago levels, and the midpoint of its August quarter revenue guidance range implies 83% annual growth. Samsung, the world's biggest memory maker, saw its memory revenue rise 65% annually in Q2.

Apple's big iPhone 8/7S production ramp is clearly helping prop up DRAM and NAND sales this summer. And given the rumored specs for Apple's next-gen flagship phone and the lack of a big iPhone upgrade cycle since the iPhone 6, it's quite possible that strong iPhone 8 demand could yield further near-term upside to memory demand and pricing estimates. Jim Cramer thinks that if Micron shares can break out of their current range with the help of the iPhone 8 launch, "the lid will come off" many chip industry peers as well.

The launch of Samsung's Galaxy Note 8, which has received positive press early on, also won't hurt near-term memory demand. And Intel's recent Xeon Scalable server CPU launch -- highly anticipated by both cloud giants and enterprises -- will provide a fresh boost to a server DRAM market benefiting from strong demand for memory-packed servers meant for cloud and analytics workloads.

A healthy graphics card market -- fueled by PC gaming, AI/machine learning projects and Ethereum mining -- is also giving the DRAM industry a lift. And rising solid-state drive (SSD) And adoption in both the PC and enterprise/cloud storage markets remains a NAND growth driver. Meanwhile, increases in the amount of memory going into the average car are a positive for both DRAM and NAND sales.

But amid all the positive news and industry data floating around, it's worth remembering that pricing has only remained strong because DRAM and NAND makers have kept a lid on supply growth. In late June, Micron forecast DRAM industry bit shipment would rise by just a modest 15% to 20% in 2017, and that NAND bit supplies would rise by a high-30s to low-40s percentage (reasonable given mobile and SSD demand).

Rising capex could change the story some. Research firm IC Insights just forecast DRAM/SRAM capex would grow 53% in 2017 to $13 billion -- to be fair, DRAM capital spending was depressed last year -- and non-volatile memory capex 33% to $19 billion. Likewise, chip equipment giants Applied Materials Inc.  (AMAT) and ASML Holdings NV (ASML) both reported seeing very strong demand from memory makers in their most recent earnings reports.

On the NAND side, it's also worth keeping in mind that new investments are focused on production of high-density 3D NAND chips. That's likely to drive big increases in bit supply, especially as the supply of newer 64-layer 3D NAND chips grows. Citi's Chris Danely, though still bullish on Micron due to expected DRAM strength, predicted last week NAND supply will surpass demand in Q4, and continue to do so in 2018. Down the line, the arrival of new Chinese 3D NAND plants will need to be accounted for.

Also deserving attention: Higher memory prices are causing some ripple effects. IDC and Gartner both reported attempts by PC makers to pass on higher DRAM prices to their customers impacted Q2 PC sales, and HP Enterprise just announced 10% to 19% price hikes for DRAM going into its older server lines. And Digitimes has reported graphics card makers are hiking their prices by 3% to 10% due to higher graphics memory prices.

On the flip side, memory makers are trading at pretty low valuations, ones that seem to assume conditions won't remain this good forever. Micron is valued at just 5.4 times its fiscal 2018 EPS consensus of $6.06, and analysts on average expect EPS to drop to $5.00 in fiscal 2019. Western Digital, owing to both NAND and hard drive worries, trades for a mere 7.3 times a fiscal 2018 (ends in June 2018) EPS consensus of $12.49.

At such valuations, investors still have a decent margin of error. If markets become confident that Micron, which reports on September 26th, can deliver over $5 in annual EPS long-term, shares likely make a big move higher.

Thus while it's certainly worth paying close attention to industry trends in light of both recent developments and how suddenly and painfully memory stocks have reacted to the end of boom cycles before, there are still good reasons to be cautiously optimistic about them for now.

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