The bottleneck posed by high-bandwidth memory for the expansion of AI data centres – a shortage expected to persist until 2027 – gives the two manufacturers unusual pricing power over the tech giants.
Report by Renta 4
European markets open slightly higher (Eurostoxx futures up 0.3%, US futures flat) as investors await developments regarding the Middle East conflict (negotiations continue, albeit in a turbulent environment and with red lines yet to be clarified: nuclear programme, fate of enriched uranium, Strait of Hormuz, release of frozen Iranian assets, Lebanese front) and with further gains in Asia, led by South Korea’s Kospi, up 3% today and 100% in 2026 (the world’s best-performing stock market this year), driven by the semiconductor rally. Notably, SK Hynix (up 13% in the session, up 1,000% over 12 months) and Micron (up 19% in the session) have surpassed a market capitalisation of one trillion dollars for the first time in their history, driven by the bottleneck posed by high-bandwidth memory for the expansion of AI data centres, a memory shortage expected to persist until 2027, giving the three manufacturers unusual pricing power over the tech giants. Adding to the positive mood is the signing of a labour agreement that will avert a strike at Samsung.
In geopolitical terms, and against a backdrop of little news regarding negotiations in the Middle East, Brent remains volatile: up 4% yesterday, recovering to the $100/bbl level as hopes of a deal cooled following attacks by the US and Israel on Iranian ships and missile bases in the Strait of Hormuz, triggering a slight rise in European yields (up 3 bp following Monday’s 9 bp fall), whilst US yields edged down (down 7 bp) as the US market was closed on Monday for a public holiday. Today, Brent is down slightly (1% to $98/bbl).
As regards central banks, and specifically the ECB, we highlight yesterday’s comments by Schnabel, who explicitly spoke of the need to raise rates at the next meeting (11 June), even if there is a US-Iran agreement, following which the probability of a 25 bp hike rises from 77% to 90%. Behind this statement lies the realisation that the energy shock has already caused structural damage to infrastructure and supply chains that monetary policy cannot ignore. He adds that there are already early signs of second-round effects spilling over into general consumption, although this view is not shared by all ECB members, and is counterbalanced by wage moderation to 2.5% in Q1 2026. These statements follow those of Lagarde, who has already stated that inflation forecasts will be revised upwards (in March, CPI was estimated at 2.6% for 2026, 2.0% for 2027 and 2.1% for 2028, although in the negative scenario they rose to 3.5%, 2.1% and 1.6% and in the severe scenario to 4.4%, 4.8% and 2.8%), a logical revision in light of energy inflation (11.9% year-on-year) and the highest cost inflation in three and a half years in the PMI surveys.
At R4, we agree with the idea of a 25-bp “safety” hike to avoid second-round effects, but we do not agree with the 2–3 hikes currently priced in by the market. We would reiterate that we are not in the same situation as in 2022 (back then, the supply shock was compounded by a demand shock – the post-Covid recovery – with much greater fiscal stimulus, higher inflation and a much looser monetary policy with a deposit rate of -0.5% versus the current 2% plus QE) and we must avoid repeating the mistakes of the past (stagflation) by raising policy rates further (Trichet raised rates in 2008 and 2011 to curb the oil-related surge in inflation, then was forced to cut them in the wake of the Great Financial Crisis and the European Debt Crisis).
