Institution roadshow: The storage industry is shifting towards an operating model of "high profits, stable prices, and weak cycles".

The latest research report from Bank of America Securities points out that the global storage chip industry's business model is increasingly resembling the chip foundry industry, showing a "quasi-foundry" characteristic of significant weakening cycles, stable prices, and continuously increasing profit margins. This transformation is supported by multiple factors: in early 2026, DRAM and NAND spot prices continued to rise significantly, with DDR4 prices increasing by over 200% in a single month; the strong performance guidance released by Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR also confirms the high prosperity of the industry chain, especially benefiting storage industry leaders like SK Hynix. According to Hard AI, during recent roadshows on the East and West Coasts of the United States, the Bank of America team observed that most investors recognize that the current strength of the storage cycle far exceeds the past and have already gained substantial returns from it, but the market sentiment is clearly divided: there are optimists who firmly believe in the long-term prosperity of the industry driven by AI, as well as cautious investors who are concerned about high valuations and the sustainability of future growth momentum. Investors are mainly concerned about several risk factors: after experiencing a 2-3 year increase, the price-to-book ratio is at a historical high; capital expenditures continue to rise, with leading companies like Samsung Electronics significantly expanding production capacity; the momentum of average selling prices (ASP) may slow down after the second half of 2026; the memory of the demand decline following the 2019 cloud computing hardware cycle is still fresh; and there is a structural contradiction between IT production pace and DRAM supply. Despite these concerns, the core logic proposed in the report that the storage industry is transitioning to an operating model of "high profit, stable prices, weak cycles" is widely recognized. Even though the momentum of ASP may weaken after the second quarter of 2026, the industry is still expected to maintain a high prosperity level and form a "super cycle" centered around profit margins. In addition, traditional DRAM capacity is accelerating its shift towards upgrades to HBM or premium products such as LPDDR5/GDDR7, and the sales of multi-chip integrated solutions continue to grow. It is worth noting that some aggressive investors believe that if SK Hynix's profitability can match that of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, its market value could reach the trillion-dollar scale. However, the report also warns that the NAND market may face new supply-demand balance pressure by the end of 2026 due to capacity releases and migration to 200-300 layers. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) growth guidance favors Hynix, Samsung under pressure The performance guidance recently announced by Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is seen as a key indicator for the industry: the company expects a compound annual revenue growth rate of 30% in 2026 and to maintain an annual growth rate of over 20% until 2029, with annual capital expenditures remaining above $50 billion. This optimistic outlook is closely related to SK Hynix's leading position in the HBM market, where it currently holds over 60% of the global HBM supply share. This trend is reshaping the industry's competitive landscape. With its continued leadership in 2-nanometer processes and CoWoS advanced packaging technology, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is constantly consolidating its technological barriers, limiting Samsung Electronics' catch-up space in the wafer foundry field. Financial comparisons also highlight the difference: Samsung's wafer foundry business is still in the red, while Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has had an operating profit margin consistently above 50%. In this industry linkage, SK Hynix's strategic position as the core HBM supplier for Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is further strengthened, not only consolidating its competitive advantage in the storage chip field, but also promoting the formation of a closed-loop ecosystem from advanced processes, high-end packaging to high-performance storage. Spot prices skyrocket, supply continues to tighten The report points out that the DRAM spot market is currently extremely tight. In the first half of January this year, DDR4 and DDR5 spot prices continued to be strong, with weekly increases of about 10%, maintaining a cumulative increase of 100%-200% since the fourth quarter of 2025. In detail: the 16Gb DDR5 spot price has risen to $35.0, with a 10% weekly increase, a 238% increase for the quarter, and an impressive 647% increase for the year; the 16Gb DDR4 spot price reached $75.8, with a 7% weekly increase, a 323% increase for the quarter, and a staggering 2315% increase for the year; the 8Gb DDR4 spot price also rose to $29.1, with a year-on-year increase of 1886%. It is worth noting that the DDR4 spot price has shown a structural "inversion": since June 2025, the 16Gb DDR4 price ($75) has been significantly higher than the same specification DDR5 ($35), creating a rare price inversion phenomenon. This is mainly due to the continuous shift of traditional DDR4 capacity by the three major memory chip manufacturers to more advanced processes, resulting in a continuous tightening of the supply side of DDR4. Currently, manufacturers and OEMs are still concerned about the supply of traditional DRAM modules. The report predicts that spot prices still have further upside potential, although the current price rise is partly driven by speculative trading rather than purely by actual demand. In addition, NAND spot prices are also on the rise this week, with price increases ranging from 5% to 10%. Trade data confirms industry prosperity South Korean semiconductor export data continues to confirm the high prosperity of the industry. In the first 10 days of January 2026, semiconductor exports reached $4.6 billion, a substantial year-on-year increase of 46%, although down by 12% compared to the previous month, it is still at a historically high level. So far, South Korean semiconductor exports have achieved year-on-year growth for 25 consecutive months, with growth rates consistent with the high levels seen in November (+18%) and December (+46%) of 2025. Looking ahead, investors are advised to focus on the potential supply-demand opportunities in the NAND market in the second half of 2026, while also closely monitoring the impact of capital expenditure expansion on the industry's long-term profit structure. Overall, the structural transformation of the storage chip industry towards the "quasi-foundry" model is pushing the sector beyond traditional cyclical valuation logic, initiating a sustainable value reassessment process. This article is reprinted from "Wall Street View"; GMTEight Editor: Yan Wencai.