Following a sharp Monday plunge of over 5%, the Kospi, South Korea's benchmark stock index heavily weighted by global storage chip giants Samsung Electronics and SK hynix, staged a powerful rebound of nearly 7% today. Concurrently, shares of leading US storage product makers Western Digital (WDC.US) and Seagate Technology PLC (STX.US), which experienced significant declines last Friday, rallied strongly together. Western Digital's surge of over 10% at one point on Monday completely erased the previous Friday's暴跌, highlighting that the sharp single-day decline in storage giants' stock prices alongside precious metals was a market "misjudgment." Judging by the全线大反弹 trend in the Asia-Pacific storage chip/product sector on Tuesday, global capital's bullish sentiment towards the storage sector remains fervent.
Following strong earnings and future guidance from HDD leader Western Digital, a recent research report from UBS indicates that both operational execution and industry sentiment are "exceeding expectations." HDDs, particularly high-capacity nearline HDDs for data centers, remain in an upcycle characterized by tight supply and robust demand. However, valuations and market sentiment have already priced in this "good news" very thoroughly, and the long-term price/valuation of the two HDD oligopolists—Seagate and Western Digital—cannot avoid the characteristic of cyclical mean reversion. For investors seeking alpha returns from the storage sector, UBS suggests focusing more on pure-play storage chip giants, such as the three major memory chip manufacturers—Samsung, SK hynix, and Micron Technology. Consequently, while UBS raised Western Digital's profit forecasts and target price, it maintained a "Neutral" rating, explicitly stating the firm "still prefers data center enterprise SSDs (eSSD) and HBM, high-performance server DDR series enterprise storage products," rather than heavily weighting storage allocations on cyclical HDD stocks.
Specifically, UBS maintained its 12-month "Neutral" stock rating on Western Digital, while raising its target price to $285 (up from a previous $230). Western Digital's stock price surged 7.99% on Monday to $270.23, with intraday gains exceeding 10%. Almost simultaneously, a report from Wall Street giant Goldman Sachs indicated that last Friday's weakness in the US storage sector and Monday's sharp decline in Asian storage stocks were a misreading of the strong underlying fundamentals in storage. Goldman Sachs emphasized that despite spot market volatility, DRAM contract prices have not fallen but instead face expectations of even steeper increases. Consequently, Goldman Sachs significantly raised its Q1 2026 price increase forecast for overall DRAM, including DDR4 and DDR5, expecting a quarter-on-quarter surge of 90-95%, far exceeding prior market and the firm's own expectations.
UBS's storage sector trading framework suggests a short-term focus on the HDD景气周期, while the medium to long term should concentrate on the memory chip manufacturers. UBS's analyst team stated that short-term focus can be placed on the two近乎垄断的 HDD leaders—Seagate and Western Digital—treating them collectively as a "short-term trading theme based on storage景气度 cycles." For medium to long-term alpha, bets should be placed on the supply-demand gap and pricing power of Memory (HBM, high-end DDR, and the NAND/controller ecosystem underpinning data center enterprise SSDs). This aligns with the current AI data center expansion pushing HBM and traditional DRAM/NAND into more severe supply-demand imbalances, meaning the pricing and supply discipline led by the three major memory manufacturers will only exacerbate the imbalance, with meaningful supply relief unlikely before 2028.
For instance, storage chip leader SK hynix disclosed strong AI-driven HBM demand and leads in HBM market share; Samsung Electronics management has also publicly emphasized smooth progress on HBM4 and imminent wins with major clients including NVIDIA. Meanwhile, industry data from sources like TrendForce and Reuters point to a continued significant upward trend in DRAM/enterprise SSD prices into early 2026, reflecting a more sustained "scarcity premium" in the memory chain. UBS noted that rising data center "exabyte-scale" demand is driving the HDD industry into a stronger profit growth cycle underpinned by an "oligopolistic structure, supply discipline, and technological iteration." However, long-term prices/valuations cannot escape cyclical mean reversion, and the super combination of "cyclical景气度 + valuation" has reached historically high levels.
Therefore, UBS reduced the target multiple for Western Digital from 23x to 15x in its report, citing a shift to a longer-term average S&P implied multiple assumption rather than the more "euphoric" HDD storage valuation levels of the past three years. UBS positions Western Digital as an "industry debate" storage stock: while industry fundamentals remain strong, the company's valuation and profit margins are simultaneously at historical highs. Coupled with uncertainty surrounding the advancement of its proprietary HAMR technology (especially relative to the nearline high-capacity HAMR节奏/execution advantage of its sole HDD competitor, Seagate), the risk-reward profile is not cheap.
UBS also compared Western Digital to "memory giant stocks" like the US's sole memory chip manufacturer Micron, SK hynix, and Samsung Electronics: even under relatively optimistic assumptions where "Western Digital's gross margin could reach 60% with a mid-term EB compound growth rate of 20%+," its valuation attractiveness may not necessarily be superior to memory stocks, hence UBS "still prefers memory." Overall, UBS acknowledges that high-capacity Nearline HDDs will maintain strong景气度和供给纪律 driven by the AI/cloud computing infrastructure super construction cycle. However, with valuations and profit margins near cyclical highs and HAMR roadmaps still uncertain, the UBS analyst team prefers to place alpha bets on the broader memory赛道 beyond the high-capacity HDD domain dominated by the two oligopolists.
Demand for DRAM/NAND memory chips remains persistently strong, with prices for these product series (e.g., DDR4/DDR5/data center enterprise SSD series) exhibiting野蛮扩张之势. This is primarily because the deluge of AI computing power is pushing memory chip demand and their importance to AI training/inference systems to unprecedented heights. Current global AI computing demand continues to show an exponential growth trend, with supply struggling to keep pace with demand intensity, a fact evident from the exceptionally strong recent earnings data from "global chip king" TSMC and "lithography machine king" ASML.
On Wall Street, Morgan Stanley, Nomura, and Bank of America are proclaiming the full arrival of an AI-driven "memory chip super cycle," whose intensity and duration may far surpass the "cloud computing era-driven storage super bull market" of 2018. Whether it's Google's massive TPU AI compute clusters or vast NVIDIA AI GPU compute clusters, all rely on integrated HBM memory systems for the AI chips. Beyond HBM, tech giants like Google and OpenAI accelerating the construction or expansion of AI data centers must also purchase server-grade DDR5 memory and enterprise-grade high-performance SSD/HDD storage solutions on a large scale. Unlike Seagate and Western Digital's focus on monopolizing nearline high-capacity HDDs, the three major memory manufacturers—Samsung Electronics, SK hynix, and Micron—are strategically positioned across multiple core storage domains: HBM, server DRAM (including DDR5/LPDDR5X), and high-end data center enterprise SSDs (eSSD). They are the most direct beneficiaries within the "AI memory + storage stack," poised to reap the "super红利" of AI infrastructure.
Bullish sentiment on Wall Street towards the memory chip sector is becoming increasingly frenzied. Memory chip manufacturers are reallocating production lines to the much more profitable HBM to meet the近乎 "insatiable" strong demand from AI data centers. Because HBM requires approximately three times the wafer capacity for equivalent storage capacity compared to standard DRAM, this shift significantly reduces supply available for the consumer electronics industry. This threatens PC makers and smaller electronics companies with double-digit price increases. The three近乎垄断的 memory manufacturers—SK hynix, Samsung, and Micron—are concentrating most of their capacity on HBM memory systems. These products require more advanced process capacity and involve greater manufacturing and packaging/testing complexity compared to DDR series and HDD/SSD memory chips. Consequently, the continuous migration of capacity to HBM by these three leaders is largely causing supply shortages for these drive-based storage products.
Nomura's latest assessment reiterates that this "memory chip super cycle" will last at least until 2027, explicitly stating in its report that "meaningful supply increases are expected earliest in 2028." The report repeatedly emphasizes that expanding capacity for HBM memory systems and components like eSSD is not something that can be done "at will," involving the节奏 of greenfield/brownfield/customized semiconductor equipment upgrade plans. Using SK hynix as an example, Nomura pinpoints capacity constraints precisely to factors like long cleanroom lead times/wafer capacity, significant delays in cycle times and yields due to advanced process upgrades, and limitations on overseas fab construction/upgrades, concluding that supply increases will be slower and the shortage will persist longer.
In the view of Wall Street giants like J.P. Morgan, the biggest winners of this unprecedented "storage super cycle," besides the HBM domain led by the three major memory manufacturers, might also include the eSSD领域 led by the manufacturers themselves, Kioxia, and SanDisk. J.P. Morgan states that the AI inference wave is transforming NAND flash from a "strong cyclical commodity" into a high-growth AI infrastructure asset. According to J.P. Morgan and others, as AI workloads shift from training to inference, and given HDD supply bottlenecks in nearline storage, NVMe eSSDs focused on the enterprise storage hot tier are experiencing unprecedented structural growth. J.P. Morgan forecasts that the blended average selling price for the NAND industry will surge 40% year-on-year in 2026. More critically, this increase is not fleeting; the institution expects prices to remain near historical highs throughout 2027.
A common misconception in storage thematic investing is that the AI compute frenzy benefits DRAM (especially HBM) in the long term, with NAND playing a secondary role. However, J.P. Morgan dedicated significant space in a report to correct this view: in the era of AI inference, the importance of eSSD is no less than that of HBM. Analysts at Citigroup, in their latest outlook, presented an even more aggressive bullish stance than UBS, Nomura, and J.P. Morgan. They believe that, driven by the proliferation of AI Agents and surging memory demands from AI CPUs, memory chip prices will experience失控式上涨 in 2026. Citigroup analysts violently raised their 2026 DRAM Average Selling Price (ASP) increase forecast from 53% to 88%, and their NAND ASP increase forecast from 44% to 74%. Citigroup analysts project that server DRAM ASP will surge 144% year-on-year in 2026 (previous forecast +91%), propelled by both AI training and inference demand. Using the mainstream 64GB DDR5 RDIMM as an example, Citigroup predicts its price will reach $620 in Q1 2026, a 38% quarter-on-quarter increase, significantly higher than the previous forecast of $518. In the NAND sector, Citigroup's forecasts are equally aggressive, raising the 2026 ASP growth expectation from +44% to +74%; within this, enterprise SSD ASP is expected to increase 87% year-on-year. In the view of Citigroup analysts, the memory chip market is entering an extremely intense seller's market, with pricing power完全掌握在 the hands of storage giants like Samsung, SK hynix, Micron, and SanDisk.
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