HBM does not dance alone, the "super cycle of storage" will not end in 2027! Nomura: Supply side "meaningful increment" to be in place as early as 2028.

Financial giant Nomura Securities, headquartered in Japan, recently released a research report on the storage chip industry, showing that the price of DRAM/NAND storage chips is steeply rising due to the strong resonance and drive of the increased demand for enterprise-level high-performance servers, DRAM+HBM storage systems, and high-performance SSDs in data centers brought about by the accelerated progress of global AI data center construction process. The report predicts that the price of server DRAM will increase by as much as 60% in the fourth quarter. The Nomura Securities analyst team significantly raised profit forecasts for Samsung Electronics and SK Hynix starting from the fourth quarter of 2025. They also further raised the target stock prices for these two Korean storage chip giants within the next 12 months. The analysts at Nomura believe that this current "storage super cycle" that began in the second half of this year will last at least until 2027, and significant new supply is not expected to appear until early 2028. In recent months, the impressive performance of the world's three major storage chip giants Samsung Electronics, SK Hynix, and Micron, as well as other storage giants like Western Digital and Seagate, has led financial giants such as Nomura, JPMorgan Chase, and Morgan Stanley to proclaim the arrival of a "storage super cycle." This trend highlights the continuous surge in demand for AI training/inference computing power and the recovery of consumer electronics demand driven by the AI boom, which is driving the exponential growth of demand for DRAM/NAND storage products, especially in the areas of HBM storage and high-performance DDR5 for servers. Additionally, there has been a significant increase in demand for enterprise-level SSDs in the NAND sector. Morgan Stanley's analysts stated in a December research report that Micron's performance shows "the best revenue and profit growth trajectory in the history of the U.S. semiconductor industry" aside from Nvidia. They expect Micron's revenue for the fiscal year ending in August to nearly double. Since announcing their performance last week, Micron's stock price has risen by over 25% and reached new historical highs. The three major storage chip original equipment manufacturers (OEMs) SK Hynix, Samsung, and Micron have been focusing most of their production capacity on HBM storage systems. The complexity of the advanced process capacity and manufacturing and testing complexity of such storage products, compared to DDR series and HDD/SSD storage chips, has led these leading storage chip manufacturers to continuously shift their production capacity to HBM. This has significantly impacted the supply-demand balance for these hard drive-like storage products. Micron, in order to focus its storage capacity on meeting the demand for storage chips in large-scale new AI data centers, announced in early December that it would stop selling storage products to individual consumers in the PC/DIY market. This underscores the continuous surge in demand for high-performance data center-level DRAM and NAND products on the enterprise side, driven by the global AI infrastructure boom. Both Google's massive TPU AI computing cluster and Nvidia's massive AI GPU computing clusters rely heavily on integrated HBM storage systems with AI chips. Therefore, the technology giants' accelerated construction and expansion of AI data centers require large-scale purchase of server-grade DDR5 storage and enterprise-level high-performance SSDs/HDDs. Nomura reiterates that the "super cycle" will continue until 2027 The analyst team at Nomura believes that investors in 2026 should continue to be overweight in storage leaders and focus on the three hits of storage chips - "price-profit-valuation" as the main investment theme for storage in 2026, rather than just focusing on HBM as a single theme. The institution predicts that the profits of the three major storage chip companies will hit historical highs. Nomura states that the profit drivers of the three major storage chip leaders will upgrade from "HBM solo" to "HBM+commodity style DRAM+enterprise-level SSD/NAND", capturing the "upward cycle" rather than just betting on the "valuation story". The structure of the three major storage chip products is more "switchable," meaning that the demand cycle is more durable: when commodity profits rapidly improve, manufacturers do not have to passively take orders on HBM storage systems, but can expand their resources between HBM/commodity DRAM/NAND based on marginal profits. This is equivalent to enhancing supply-side discipline and bargaining power in the industry chain. Nomura's latest assessment shows that the institution reiterates that the current "storage chip super cycle" will last at least until the end of 2027, and "meaningful supply increase is not expected until 2028." The report repeatedly emphasizes that the expansion of production capacity for storage chips and HDD/SSD storage components is not as simple as "just expanding," and involves pace control of greenfield/brownfield/customized semiconductor equipment upgrades. For example, in the case of SK Hynix, Nomura directly attributes production capacity constraints to clean room/fab capacity, delays in yield brought by advanced process upgrades, and restrictions on overseas chip factory construction/upgrades. This leads them to conclude that the supply increase will be slower and last longer. Bullish on SK Hynix and Samsung! Hong Kong raises target price for Korean "storage chip giants" Nomura Securities maintains a "buy" rating for SK Hynix in its research report and gives a target stock price of up to 880,000 Korean won, higher than the previous target price of 840,000 Korean won, suggesting a potential upside of up to 50% for SK Hynix's stock price in the next 12 months. The Nomura analyst team stated: "As AI investments and server cluster deployment by tech giants continue to increase, the pricing power of storage chips is shifting comprehensively towards suppliers, and storage companies are now in a market environment with the flexibility to adjust their product mix during an upward cycle." Nomura significantly raised profit forecasts for the fourth quarter and full-year 2026, emphasizing that the profit margins of commodity DRAM will match or even exceed those of SK Hynix's performance, which has been heavily reliant on HBM storage systems in recent years. This makes profit elasticity no longer dependent solely on increased supply of HBM systems. Nomura's research report attributes SK Hynix's production capacity constraints to clean room and production time points (new production lines/new plant launch windows) as well as delays in process upgrades, leading the institution to be more confident that the prosperity will last until 2027. Nomura also raised the target stock price for Samsung Electronics from 150,000 Korean won to 160,000 Korean won, indicating a potential upside of up to 45% in the next 12 months, and pointing out that, given the continuous rise in storage chip prices, there is still significant room for improvement in Samsung Electronics' performance next year. "Due to the sharp increase in prices of general purpose DRAM and NAND flash memory in the fourth quarter, the profitability of the storage industry is rapidly improving," said the Nomura analyst team. Nomura's research report shows that the price increase of general-purpose DRAM in the fourth quarter is expected to be between 30%-40%, and the price increase of high-performance DRAM for data center servers is expected to be between 40%-60%. The report emphasizes that Samsung is much lower priced relative to its peers and whether its future target price expectations can be further increased depends on its capital expenditure discipline, shareholder return improvement efforts, and improvements in storage technology and chip manufacturing competitiveness. Nomura mentions that Samsung is more likely to focus on expanding DDR5 production capacity and climbing HBM4 production capacity at more critical points, rather than persisting with the pace of advancement of HBM3E in specific customers' products.