Wall Street investment bank Goldman Sachs has issued a report comprehensively raising price targets and profit forecasts for South Korean chip giants SK Hynix and Samsung Electronics. Goldman Sachs indicated that the industry is entering the strongest memory upcycle in history, driven by a combination of AI demand and tight supply in the traditional memory market. This is expected to propel both companies to achieve record profits and profit margins in 2026.
According to the report, the team led by Goldman Sachs analyst Giuni Lee raised the 12-month price target for SK Hynix from 1.2 million won to 1.35 million won and for Samsung Electronics from 205,000 won to 260,000 won, reiterating a "Buy" rating for both firms. Based on higher expectations for DRAM and NAND flash memory prices, Goldman Sachs significantly increased its operating profit forecasts for the first quarter of 2026 for both companies. Compared to consensus estimates compiled by Bloomberg, Goldman's forecast of 34.7 trillion won for SK Hynix and 40.3 trillion won for Samsung's Q1 operating profit are 8% and 6% above market expectations, respectively.
This aggressive upward revision reflects robust pricing dynamics in the memory market. Goldman's latest channel checks indicate that the starting points for early Q2 DRAM and NAND price negotiations are significantly higher than expectations from just a few months ago. As AI and server-led demand absorbs the vast majority of new supply, the supply sufficiency rate for core application memory chips remains at very low levels, even against a backdrop of subdued demand for personal computers and smartphones.
Strong fundamentals are set to translate directly into unprecedented financial returns. Goldman Sachs projects that SK Hynix's Return on Equity (ROE) will surpass 80% this year, a historical high, while Samsung Electronics' operating profit is expected to show year-on-year growth exceeding fivefold. Although Goldman's model incorporates an assumption of a potential mild price correction in 2027, it notes that the current valuation levels of both companies remain significantly attractive.
**Memory Chips Experience Strongest Upcycle on Record** Goldman Sachs substantially raised its price forecasts for traditional memory chips in this report. For SK Hynix, the bank forecasts that traditional DRAM prices will surge 88% quarter-on-quarter in Q1 2026, with NAND prices rising 58% quarter-on-quarter. Consequently, the full-year 2026 average selling price expectation for standard DRAM at SK Hynix was revised up to a 243% year-on-year increase.
For Samsung Electronics, Q1 DRAM and NAND price increases are projected at 88% and 71% quarter-on-quarter, respectively, with full-year NAND prices expected to skyrocket 164% year-on-year.
This pricing environment will lead to unprecedented profit margin levels. Goldman Sachs expects SK Hynix's DRAM and NAND operating margins to soar to above 70% and above 40% this year, respectively, breaking historical records. Samsung Electronics' DRAM operating margin is also projected to reach 71%, with its NAND margin hitting 46%, not only setting new records but matching or even surpassing peak levels seen during the 2017-2018 upcycle.
**AI and HBM Demand Reshapes Performance Landscape** Beyond the recovery in traditional memory, breakthroughs in the High Bandwidth Memory (HBM) business represent another core driver. Goldman Sachs reiterated its expectation for SK Hynix to maintain a solid leadership position in AI memory, projecting its full-year 2026 operating profit to reach 20.2 trillion won, with ROE jumping significantly from 44% last year to over 81% this year.
Progress at Samsung Electronics in the HBM sector is also notable. Benefiting from the industry's first launch and shipment of HBM4, a solid position in Google TPUs, and increased market share at Nvidia, Goldman expects Samsung's HBM revenue to achieve 158% year-on-year growth in 2026, reaching $15 billion.
This shift is also directly reflected in Samsung's customer structure, with Alphabet replacing Verizon in its list of top five customers for 2025, indicating an accelerated shift in its product portfolio towards servers and AI. Driven by this, Samsung's overall 2026 operating profit is forecast to reach 23.9 trillion won.
However, Goldman also noted that continuously soaring memory component costs will significantly pressure the profit margins of Samsung's smartphone business, with its smartphone operating margin expected to decline to a historical low of 4% this year.
**Increased Capital Expenditure and Valuation Appeal** Facing tight supply conditions, both companies plan to further expand capital expenditure. Goldman Sachs raised its 2026 memory capital expenditure forecast for SK Hynix to 40 trillion won and for Samsung Electronics to 46 trillion won.
Goldman emphasized that industry capital expenditure will be heavily skewed towards high-margin DRAM and HBM. Furthermore, as most of the incremental funding is allocated to infrastructure preparation, a substantial amount of new capacity is not expected to be released to the market in the short term. Additionally, Samsung Electronics invested a record 37.7 trillion won in research and development in 2025 (an 8% year-on-year increase) to consolidate its technological leadership.
Regarding valuation, Goldman believes both stocks remain cheap even after factoring in expectations for a slight price adjustment in 2027. Based on 2027 projected figures, SK Hynix trades at a price-to-earnings ratio of 4.5x and a price-to-book ratio of 1.7x, with ROE maintained at 46%. Samsung Electronics trades at a P/E of 6.8x and a P/B of 1.7x, with an ROE of 28%.
Considering SK Hynix's share buybacks, dividends, and potential ADR listing plan, along with Samsung Electronics' move to cancel nearly 87 million treasury shares, Goldman maintains a highly constructive view on the medium- to long-term prospects of both companies. Potential risks highlighted by Goldman primarily include a deterioration in memory supply and demand due to weak macro end-demand, delays in technology iteration, and the risk of market share loss for Samsung in the mobile OLED market.
Comments