| | | From another site, Asia-centric post on the memory companies Hynix and Samsung but by implication Micron as well.--
Morgan Stanley: This memory “super cycle” will far surpass the historical peak
Morgan Stanley pointed out that a new memory “super cycle” driven by AI has already arrived, and its intensity and logic are completely different from any previous cycle.
Morgan Stanley stated that, unlike in the past, this cycle is led by AI data centers and cloud service providers, whose customers have low price sensitivity, and inference workloads have become the main driver of general-purpose memory demand. Meanwhile, the latest channel checks indicate that in Q4, server DRAM contract prices have surged by nearly 70%, NAND contract prices are up 20–30%, and suppliers hold unprecedented pricing power.
The firm maintains Overweight ratings on SK hynix and Samsung Electronics, expecting rising memory prices to push share prices to new highs and for memory makers’ profits to significantly beat expectations.
Morgan Stanley noted that the core drivers of this cycle have changed in quality. The buyers are no longer traditional customers sensitive to price, but AI data centers and cloud-service giants engaged in an arms race to build compute infrastructure.
For them, securing memory is a strategic “must-have,” and price sensitivity has fallen to the lowest level. At the same time, HBM (high-bandwidth memory) production continues to structurally cannibalize traditional DRAM capacity. As Morgan Stanley emphasized in the report:
“The peculiar point is as follows: today’s memory demand has evolved into a competition led by AI data centers (compute-intensive platforms) and cloud service providers, and they are not as price-sensitive as traditional customers… The exponential upward trend in inference demand provides a solid foundation for this, and this is what makes this cycle fundamentally different from any previous one.”
According to Morgan Stanley’s latest channel checks, the DRAM price outlook turned sharply bullish in just two weeks. Q4 server RDIMM contract prices jumped about 70%, far surpassing the previous 30% expectation. The DDR5 (16Gb) spot price soared 336%, from $7.50 in September to $20.90 now. DDR4 prices also saw a 50% increase in offer levels. Most contract transactions will not be finalized until the end of this month, but customer acceptance seems inevitable—because they fear further price hikes and supply constraints.
Furthermore, NAND has fallen into a severe shortage:
NAND has become a key component of AI compute infrastructure and video storage. Prices of 3D NAND wafers (TLC and QLC) are expected to rise 65–70% quarter-over-quarter to respond to capacity constraints. Nearline storage specifications are shifting from 128TB to 256TB QLC SSDs. TrendForce forecasts that enterprise SSD bit-based server demand in 2026 will increase by about 50% year-over-year. Samsung’s bit production in the first half of 2025 was constrained by the transition from V6 176-layer to 321-layer V8 NAND, and in the second half it will ramp only gradually, resulting in this year’s bit shipment growth rate being limited to 10%.
There is still ample room for price increases, and the cycle is not at its peak yet
The market is often constrained by “peak fear,” assuming that once stock prices hit new highs a reversal will soon follow. However, Morgan Stanley emphasizes that in this AI-led market, the ultimate determinant is earnings growth, not historical valuation:
Currently, server DRAM prices are $1/Gb, whereas the peak of the cloud super cycle in Q1 2018 was $1.25/Gb. Given the scale of AI infrastructure investment and the dynamic nature of hyperscale customers, the peak price of this cycle is highly likely to surpass the previous high. Memory cycles typically last 4–6 quarters, and profits are in the process of being realized. The key, however, is comparison with market expectations—the market is showing noticeably greater enthusiasm for general-purpose memory prices. Valuation is not a predictor of future returns; it reflects supply and demand, not historical precedents.
Based on the strong long-term drivers of AI, memory price increases have already entered “no-man’s-land,” and earnings prospects far exceed the market’s general expectations. This implies there is still enormous upside potential in stock prices.
“As AI-related capital expenditures continue to expand, the share of memory in total spending is likely to keep rising—this will support P/B to far exceed historical peaks. In our view, this is a story where multiple expansion is layered on top of cyclical earnings recovery…
We believe analysts’ data revisions are always lagging—for SK hynix and Samsung, our 2026 and 2027 earnings forecasts are 31~48% and 38~51% higher than market consensus, respectively.”
In sum, the drivers of this memory “super cycle” are more durable, the magnitude of price increases has surpassed historical records, and earnings prospects are higher still. Coupled with a strong cycle, this creates a rare investment opportunity for memory manufacturers that hold pricing power. |
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