Citi has released a global semiconductor research report, asserting that the expansion of AI "continual learning" and inference demand will drive enterprise SSD (eSSD) demand up 52.9% year-on-year by 2027. As memory manufacturers prioritize new capacity for DRAM/HBM, the NAND supply-demand balance is projected to face a shortfall of approximately 6.1% in 2027 and 5.5% in 2028. Citi reiterates its Buy rating on both Samsung Electronics (target price of 430,000 KRW) and SK Hynix (target price of 3,000,000 KRW).
Demand side: Continual learning transforms storage into an AI necessity
Unlike the previous paradigm where "training completion means fixed parameters," continual learning requires AI systems to continuously absorb new information during operation while retaining previously learned data. This creates a need for long-term preservation and rapid retrieval of massive historical datasets. Citi believes that as continual learning technology matures, eSSD will become a key carrier for AI inference (as previously discussed in the report "Continual Learning to Fuel HBM/eSSD Demand"), a trend that will persistently elevate eSSD demand through 2027 and beyond.
eSSD demand to surge 52.9% in 2027, with QLC "near-GPU storage" gaining momentum
Citi projects that, driven by rising continual learning adoption and expanding AI inference demand, eSSD demand will grow 52.9% year-on-year in 2027, with total SSD demand growth of approximately 45.0%. On the technology roadmap, advanced solutions such as XL Flash, HBF, and complementary storage technologies like CXL will see simultaneous demand increases. QLC-based "near-GPU storage" solutions are expected to accelerate—AI systems need larger storage pools closer to accelerators to support efficient data retention and retrieval.
Enterprise demand to offset consumer weakness, with Chinese data centers as a growth highlight
In contrast, consumer-grade NAND demand may weaken due to sluggish smartphone and PC markets. However, Citi judges that AI inference-related NAND demand will be sufficient to offset this softness. Additionally, AI data centers—particularly those in China—are increasingly considering SSD as a replacement for HDD, which could provide further upside for QLC SSD demand starting in 2027.
Supply side: DRAM/HBM capacity crowding opens NAND gap
The supply side is the report's core focus. Citi forecasts NAND demand growth of +29% and +33% year-on-year for 2027 and 2028, respectively, outpacing supply growth of +21% and +25% over the same periods—because memory manufacturers are prioritizing new capacity for DRAM/HBM greenfield expansion rather than NAND. On the demand structure side, driven by continual learning and Nvidia's KV-cache offloading trend, high-density eSSD demand will grow +53% and +41% year-on-year in 2027 and 2028. Consequently, the NAND supply-demand balance will tighten significantly: Citi calculates a supply-demand gap of approximately 6.1% in 2027 and 5.5% in 2028 (compared to roughly 4.8% in 2026).
Investment implications: Reiterating Buy on Samsung Electronics and SK Hynix
Citi's conclusion is that continual learning will drive a sharp rise in eSSD demand, offsetting weak consumer-grade NAND demand. KV-cache offloading and the HDD-to-SSD replacement trend will further accelerate high-density storage adoption. Based on tightening NAND fundamentals and AI-driven structural storage demand growth, Citi reiterates Buy ratings on Samsung Electronics and SK Hynix—both are favorably positioned.
Citi assigns Samsung Electronics a 12-month target price of 430,000 KRW, based on a sum-of-the-parts (SOTP) valuation of 2026E EBITDA. For total operating value, the five business segments reference global peers to determine fair-value EV/EBITDA multiples: Memory at 6.3x, Foundry at 1.0x, Display at 0.5x, Mobile at 4.0x, and Consumer Electronics at 2.0x, consistent with comparable company trading multiples. Downside risks include: 1) approval delays for HBM shipments to key customers exceeding expectations; 2) PC sales weaker than expected and NAND demand falling short of assumptions; 3) aggressive competitor investment in memory semiconductors/foundry negatively impacting prices; 4) intensified mobile market competition compressing Samsung's mobile margins; and 5) significant KRW appreciation impacting earnings.
Citi assigns SK Hynix a 12-month target price of 3,000,000 KRW, also based on SOTP valuation of 2026E EBITDA. The business is split into HBM and commodity memory segments to reflect structural shifts in the next-generation memory market: the HBM business is priced with attributes closer to a foundry business (referencing global peers such as TSMC for fair-value EV/EBITDA multiples), as the memory market transitions from a traditional commodity market to a highly customized, customer-adjacent foundry-style market. The commodity memory business uses the 12-month forward EV/EBITDA average from the early/initial phases of historical upcycles. This yields an 8.6x EV/EBITDA for the HBM segment and 7.4x for the commodity memory segment, arriving at the target price. Downside risks include: 1) DRAM demand downturn; 2) weaker-than-expected NAND demand; and 3) global consumer weakness.
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