The demand for AI infrastructure has been driving the memory industry into a new round of price increases since the second half of 2025.
The supply and demand for key components such as DRAM, NAND Flash, and enterprise-grade SSDs remain persistently tight, with price pressures spilling over from data centers to consumer electronics terminals like PCs and tablets. Gartner forecasts that DRAM and NAND Flash price inflation will reach 80% and 202% respectively in 2026, with related product shortages expected to persist until the second half of 2027.
As a leading global enterprise in the AI ecosystem, Lenovo Group spans PC, server, enterprise infrastructure, and service businesses. The company directly faces the short-term cost pressures from rising memory prices while also possessing firsthand information from upstream supply, downstream orders, and customer demand, giving it a stronger foundation for judging this memory cycle.
At the Investor Day held by Lenovo Group on June 25, the heads of the company's three major business groups also addressed this market focus from the perspectives of devices, infrastructure, and services. They pointed out that the performance guidance disclosed by Lenovo's management has already factored in the rising memory costs. Looking ahead, "Lenovo will be one of the primary beneficiaries."
At the Investor Day, Lenovo Group CFO Wai Ming Wong disclosed the company's performance guidance, outlining targets for revenue, net profit margin, and EPS growth: within 1-2 years, $100 billion, over 3%, and 1.5x; within 3-5 years, $130 billion, over 5%, and 3.2x; beyond 5 years, $150 billion, over 8%, and 5.9x.
Lenovo Group Chairman and CEO Yuanqing Yang expressed strong confidence in achieving these performance targets. Notably, the confidence conveyed at this Investor Day is not based on an assumption of falling memory prices but on the realization path for Lenovo Group's higher profitability.
Securing Supply
"The first reaction is that this is certainly a challenge," said Luca Rossi, head of the Intelligent Devices Group (IDG) at Lenovo Group, noting that the scale of the current changes in the memory market is "unprecedented." However, for Lenovo Group, the company is in a relatively good position because it has secured ample supply.
On June 25, media reports indicated that Lenovo Group has long-term supply agreements with the three major memory manufacturers: Micron, Samsung, and SK Hynix. "In the current market, the advantage isn't about who is cheaper, but who has supply." Against the backdrop of rising memory prices and supply shortages, the ability to "secure supply" is becoming a crucial support for Lenovo Group to improve its profit margins.
This advantage stems from Lenovo Group's globalized, scaled operations and years of excellence in supply chain management, which have formed a "moat" during this memory supercycle.
Recently, the authoritative global supply chain ranking, the Gartner Supply Chain Top 25, announced its latest 2026 rankings, where Lenovo Group secured the fifth position, rising three spots from last year and achieving its best historical ranking.
Lenovo Group operates over 30 self-owned or partner manufacturing bases in more than 10 markets globally, works with over 2,000 tier-one suppliers, and processes more than 10 million order lines annually. Its "global resources, local delivery" business model ensures fulfillment. On the other hand, iChain enables rapid perception of changes in a volatile environment, dynamic resource scheduling, and intelligent collaboration with ecosystem partners, becoming a new core competency.
In terms of scale advantage, for memory chip suppliers, PCs, phones, and servers consume the same type of upstream capacity. Lenovo can negotiate with upstream suppliers based on the group's total procurement volume and then allocate resources among different businesses according to actual demand. In contrast, standalone server manufacturers find it harder to obtain equivalent bargaining and allocation power.
As Luca summarized, "This situation is not the same for all companies. Our business is geographically diversified enough. If you have strong supply capability and pricing power, you have the ability to manage this challenge. In this process, I am also confident that we will continue to improve our profit margins."
Ken Wong, head of the Solutions and Services Group (SSG), also emphasized the importance of "securing supply": "For enterprise customers, how much more they will have to pay tomorrow and whether they can get stable supply in the future are becoming more critical issues than the single purchase price." Against the backdrop of increasing price volatility for memory and core components, the value of TruScale lies in providing customers with predictability in cost and supply.
In fact, after Lenovo Group disclosed its Q4 and full-year results for FY2025/26, the market also noted this point. For instance, CITIC Securities pointed out in a research report that Lenovo's management of memory prices and supply has been relatively effective, resulting in lower retail price increases for its devices compared to peers, which supported its gross margin performance.
Server Business Volume Expansion
"We are often asked if this is a bubble," said Ashley Gorakhpurwalla, head of the Infrastructure Solutions Group (ISG) at Lenovo Group, in response to the memory price increases. "Of course, in a market changing this fast, there is a speculative component. But stripping those factors away, the demand from the enterprise and cloud markets is still far exceeding our supply capacity. This situation will last for multiple quarters, even years."
This statement indicates that, from the perspective of Lenovo Group's infrastructure business head, the AI infrastructure demand driven by massive AI capital expenditure is not only real but will persist for years. According to McKinsey estimates, by 2030, the capital expenditure required by global data centers to meet computing power demand will be approximately $6.7 trillion, with AI-related data center capital expenditure accounting for about $5.2 trillion.
"For the current fiscal year, if there is a cost advantage in this part of the supply, it is already included in our guidance. Given the volatility in the DRAM market, it's difficult to make assumptions about future costs. But if there is a cost advantage in the future, Lenovo will be one of the primary beneficiaries," Ashley stated.
According to his analysis, the first phase of AI infrastructure primarily revolves around large model training, while the next phase will focus on scaled deployment, especially enterprise inference, on-premises deployment, and AI applications in distributed environments, which represent opportunities for Lenovo's ISG business.
Just at the MWC 26 Shanghai (World Mobile Congress) that opened on June 24, signals of AI server order backlogs also emerged. According to market sources, a Lenovo Group staff member mentioned that the volume of server orders awaiting delivery is approximately 150 billion yuan, with products currently in short supply. The strong demand for AI servers is expected to continue for some time. The person stated that Lenovo's servers collaborate with both domestic GPU and CPU manufacturers. Currently, the demand for servers in the domestic innovation market is significant, but tight chip supply has led to a large backlog of orders.
Lenovo Group's Q4 financial report disclosed that the order backlog for AI servers is approximately 140 billion yuan, a 50% year-on-year increase. Lenovo Group previously released its Q1 FY2026/27 performance outlook for ISG, with relevant indicators exceeding market expectations: ISG revenue is expected to be around $6.1 billion, a year-on-year increase of over 40%; the operating profit margin is expected to be 3.4%, a 5.4 percentage point improvement year-on-year.
Following the Investor Day, Nomura Securities raised its target price for Lenovo Group to HK$35 in one move, noting: Since May, Lenovo's stock price has risen over 100%, while the Hang Seng Index has fallen about 10% over the same period. However, this outperformance may still continue, with the first reason being that the market has not yet fully priced in the potential of Lenovo's server business.
Opening Up Space for Valuation Re-rating
Besides Nomura, following the Investor Day, several investment banks further raised their target prices for Lenovo Group. Citi Securities raised its target to HK$31, CICC raised to HK$30, and Huatai Securities maintained HK$32, among others.
Huatai Securities pointed out that Lenovo's path to profitability improvement is relatively clear, with core support coming from the high demand for AI servers, accelerated profitability growth in ISG, and the advancement of the AI PC replacement cycle. CICC believes that Lenovo is driving ISG margins to align with IDG business levels in the medium to long term through a dual-engine model of "scale engine + value engine," coupled with differentiated technological advantages like liquid cooling.
At the Investor Day, Yuanqing Yang noted that Lenovo Group's strong Q4 and full-year performance already reflects the company's commitment to sustainable growth and profitability improvement, with long-term growth primarily coming from three strategic directions.
Firstly, as AI PCs enter an accelerated adoption phase, the super agent Qira launched by Lenovo will further enhance its leading position in the AI PC field and help the company capture opportunities in the next PC replacement cycle. Secondly, Lenovo Group will seize infrastructure opportunities brought by the explosion in AI training and inference demand. Lenovo possesses industry-leading Neptune liquid cooling technology and a unique ODM+ model, enabling it to meet the AI infrastructure needs of different types of customers. As AI computing power demand continues to expand, this will become a significant pillar for Lenovo's future growth. Thirdly, Lenovo will expand its service business scale through technology-driven, asset-light models, generating more recurring revenue.
"Currently, the market's valuation of us is likely still close to that of PC peers; we believe that, looking at the overall business portfolio, the company's valuation performance could be much better than it is now," summarized Wai Ming Wong.
He further pointed out that the valuation of Lenovo Group should no longer be confined to the framework of PC peers. Instead, it should be repriced according to a multi-business portfolio comprising PCs + mobile business + servers + services & solutions + smart peripherals + enterprise storage, which corresponds to a total valuation pool of approximately $223 billion (about 1.51 trillion yuan), equivalent to roughly 5.7 times the company's current market capitalization benchmark.
As Nomura pointed out, Lenovo is in the process of valuation re-rating. Its main comparable company, Dell, currently trades at about 30 times forward one-year P/E, providing room for Lenovo's valuation to be revised upward.
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