The storage market, which has been wrongly killed, is rebounding massively! "Two-stage strategy" focuses on seizing the storage super cycle: short-term bets on HDD, long-term bets on HBM and eSSD.

The South Korean stock market benchmark index led by Samsung Electronics and SK Hynix, the two heavyweight giants of the global semiconductor storage industry, the Kospi Composite Index, rebounded by nearly 7% today after experiencing a sharp drop of over 5% on Monday, as well as Western Digital Corporation (WDC.US) and Seagate (STX.US), the leaders in the American storage products sector, also saw a significant rebound from last Friday's sharp decline. In particular, Western Digital Corporation's rise on Monday once exceeded 10%, completely covering the range of the previous Friday's sharp decline, highlighting the market's "misjudgment" of the storage giants' stock prices following the one-day drop in precious metals. Looking at the overall trend of a broad rebound in the storage chip/storage product sector in the Asia-Pacific market on Tuesday, global funds continue to exhibit bullish sentiment towards the storage industry. After HDD leader Western Digital Corporation announced strong performance and future prospects, a research report released by international bank UBS Group AG indicated that operating execution and industry sentiment are both "exceeding expectations." HDD (especially nearline capacity HDD for data centers) is still in an upward cycle of tight supply and strong demand. However, valuations and market sentiment have already priced in the "good news" thoroughly, and the long-term prices/valuations of HDD's two oligarchs - Seagate and Western Digital Corporation - cannot avoid returning to their cyclical average. For investors looking to secure excess investment returns based on the storage sector, UBS Group AG implies that they should pay more attention to pure storage chip giants such as the three major storage chip manufacturers - Samsung, SK Hynix, and Micron Technology, Inc. Therefore, UBS Group AG, despite raising its profit forecast and target price for Western Digital Corporation, maintains a "neutral" rating and explicitly states that the institution "still prefers enterprise-level SSDs for data centers, as well as HBM, and high-performance server DDR series enterprise-level storage products," rather than heavily weighting storage positions in HDD cyclical stocks. Specifically, UBS Group AG maintains a "neutral" 12-month stock rating for Western Digital Corporation, with a target price of $285 (increased from the previous $230). Western Digital Corporation's stock price surged by 7.99% to $270.23 on Monday, with an intraday increase of over 10%. At almost the same time, a research report released by Wall Street financial giant Goldman Sachs Group, Inc. pointed out that the weakness in the US stock market storage sector last Friday and the sharp decline in the Asian stock market storage sector on Monday were a misinterpretation of the strong fundamentals of the storage sector. Goldman Sachs Group, Inc. emphasized that despite market fluctuations, contract prices for DRAM have not only not dropped but instead have seen more intense expectations of an increase, leading the institution to significantly raise its forecast for the first quarter of 2026 for overall DRAM prices including DDR4 and DDR5, with an estimated increase of up to 90-95%, well above the previous market and the institution's expectations. UBS Group AG's storage sector trading framework: short-term bullish on HDD demand cycle, long-term focus on storage chip manufacturers The analyst team at UBS Group AG stated that in the short term, investors can focus on the two dominant HDD leaders - Seagate and Western Digital Corporation, considering them as a collective "short-term trading theme for the storage demand cycle." In the medium to long term, they recommend placing excess returns on the supply-demand gap and pricing power of Memory (HBM, high-end DDR, and the NAND/controller ecosystem behind enterprise-level SSDs) - which is consistent with the current expansion of AI data centers driving HBM and traditional DDR/NAND to a stronger supply-demand imbalance, meaning that the pricing and supply discipline dominated by the three major storage chip manufacturers will only result in further supply-demand imbalances, with meaningful supply relief likely not to occur until 2028. For example, storage chip giant SK Hynix has revealed strong demand for AI-driven HBM and leads in HBM market share, while Samsung's management has openly emphasized the smooth progress of its HBM4 business and the imminent acquisition of more major clients, including NVIDIA Corporation. Industry data disclosed by TrendForce, Reuters, and others point to a significant uptrend in DRAM/enterprise-level SSD prices continuing at the beginning of 2026, reflecting the sustainability of the "scarcity premium" in the memory chain. UBS Group AG indicates that demand for "ultra-large capacity (exabytes)" for data centers continues to rise, driving the HDD industry into a stronger profit growth cycle under the background of "few oligarchs + supply discipline + technological iteration," but long-term prices/valuations cannot evade the cyclical mean reversion property, and the combination of "demand cycle + valuation" has reached historically high levels. Therefore, UBS Group AG lowers Western Digital Corporation's target multiple from 23x to 15x in its research report, based on a longer-term average hypothetical S&P implied multiple assumption, rather than the "overly enthusiastic" HDD storage valuation levels of the past three years. UBS Group AG positions Western Digital Corporation as an "industry debate" storage target: the industry fundamentals remain strong, but the company's valuation and profit margins are at historical highs, further compounded by the uncertainty surrounding its unique HAMR technology advancement (especially relative to its sole competitor in nearline ultra-large capacity HDD, Seagate), making the risk-return ratio not cheap. In their research report, UBS Group AG also compares US-based memory chip maker Micron, as well as SK Hynix and Samsung, the "memory giants' stocks," indicating that even under the more optimistic assumptions of "Western Digital Corporation's gross profit reaching 60%, mid-term compound growth rate of 20%+," its valuation may not necessarily be better than that of memory chips, so the institution "still prefers memory." Overall, UBS Group AG acknowledges the strong demand cycle for nearline HDD in AI/cloud computing infrastructure super construction, along with supply discipline, but with valuations and profit margins nearing the cyclical peak, and uncertainty surrounding the HAMR roadmap, the analyst team at UBS Group AG is more inclined to place excess returns on enterprise-level SSDs that are not solely dominated by the two HDD oligarchs for nearline ultra-large capacity HDD. The continuing strong demand for DRAM/NAND memory chips and the fierce expansion of prices for these storage product series (such as DDR4/DDR5/enterprise-level SSD series) are mainly driven by the influx of AI processing power, pushing the demand for memory chips and their importance in AI training/inference systems to unprecedented heights. The global demand for AI processing power is experiencing exponential growth, far outstripping the supply intensity, as evidenced by the exceptionally strong performance data recently released by "global chip king" Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, and "lithography king" ASML Holding NV ADR. On Wall Street, institutions such as Morgan Stanley, Nomura, and Bank of America Corp are heralding the arrival of a "super cycle" for storage chips driven by the AI wave, with the intensity and duration of this cycle possibly far greater than the "storage super bull market" driven by the era of cloud computing in 2018. Whether it is the massive TPU AI computing clusters led by Alphabet Inc. Class C or the NVIDIA Corporation AI GPU computing clusters, all rely on HBM storage systems integrated with AI chips, and in addition to HBM, Alphabet Inc. Class C and OpenAI tech giants must also massively purchase server-grade DDR5 memory and enterprise-level high-performance SSD/HDD storage solutions for their AI data centers. Unlike Seagate and Western Digital Corporation focusing on monopolizing nearline large capacity HDDs, the three major storage chip manufacturers Samsung, SK Hynix, and Micron are strategically positioned in multiple core storage areas: HBM, server DRAM (including DDR5/LPDDR5X), and high-end data center enterprise-level SSDs (eSSD), making them the most direct beneficiaries in the "AI memory + storage stack," tapping into the "super dividend" of AI infrastructure. The bullish sentiment towards the storage chip sector on Wall Street is becoming increasingly frenzied Storage chip manufacturers are reallocating production lines to focus more on the highly profitable HBM, in order to meet the almost insatiable demand for AI data centers. As HBM requires about three times the wafer capacity of standard DRAM for the same storage capacity, this shift has significantly reduced the supply for the consumer electronics industry. This is threatening PC manufacturers and smaller electronics companies with double-digit price hikes. The three major monopolistic storage chip manufacturers - SK Hynix, Samsung, and Micron - have all concentrated the majority of their production capacity on HBM storage systems, which require advanced process capacity and manufacturing and testing complexity compared to DDR series and HDD/SSD storage chips. As a result, the dominant three storage chip leaders continuously shifting capacity to HBM has led to a shortage of these disk-like storage products. The latest assessment by Nomura indicates that this "super cycle" for storage chips is expected to last at least until the end of 2027, with meaningful supply increases not expected until at least 2028. The report emphasizes features that the expansion of HBM storage systems and eSSDs, among other storage components, does not happen overnight and involves upgrading semiconductor equipment in greenfield/brownfield/customized rhythms. For example, in the case of SK Hynix, Nomura precisely constrained capacity to cleanroom long cycles/wafer capacity, delayed changes in yield due to advanced process upgrades, and restrictions on overseas chip factory construction/upgrade, thereby deducing slower supply growth and a longer duration of supply gap. In the view of institutions such as JPMorgan Chase, the biggest winners of this unprecedented "storage super cycle" are not only HBM, led by the three major storage chip manufacturers, but also possibly the eSSD sector led by original manufacturers such as Micron, Seagate, and SanDisk. JPMorgan Chase states that the AI inference wave is enabling NAND flash memory to break away from the fate of a commodity with strong cyclical patterns, evolving into a high-growth asset in AI infrastructure. In their view, with AI workloads shifting from training to inference and HDD bottlenecks in nearline storage, the focus is shifting to NVMe eSSDs for enterprise-level storage hot layers, experiencing unprecedented structural growth. JPMorgan Chase projects that the mixed average selling price (ASP) of the NAND industry in 2026 will soar by 40% year-over-year, and more importantly, this hike is expected to sustain near historical highs until 2027. There is a common misconception in the market regarding storage thematic investment, that the AI power surge is long-term positive for DRAM (especially HBM), with NAND playing only a supporting role. However, JPMorgan Chase corrects this view in a research report, stating that in the era of AI inference, the importance of eSSD is just as significant as HBM. Citigroup's analysts, in their latest outlook, display a more aggressive bullish stance than UBS Group AG, Nomura, and JPMorgan Chase. The analysts believe that with the rise in AI Agent adoption and the surge in AI CPU memory demand, storage chip prices will see an uncontrollable increase in 2026. Citigroup's analysts have revised their expected price increases for 2026 dramatically, with ASP for DRAM jumping from the originally forecasted 53% to 88%, and for NAND from 44% to 74%. Citigroup's analysts forecast a 144% year-over-year increase in ASP for server DRAM in 2026 due to the dual drivers of AI training and inference demand (previously predicted at +91%); for example, for the mainstream 64GB DDR5 RDIMM product, Citigroup predicts a price of $620 in the first quarter of 2026, a 38% increase compared to the previous forecast of $518. In the NAND field, Citigroup's forecasts are equally aggressive, raising the ASP growth expectation for 2026 from +44% to +74%; notably, the ASP for enterprise-level SSDs is expected to increase by 87%. In the view of Citi's analysts, the storage chip market is entering an extremely intense seller's market, with pricing power fully controlled by industry giants such as Samsung, SK Hynix, Micron, and SanDisk. As major storage chip makers are reallocating their production lines to focus more on the highly profitable HBM to meet the insatiable demand for AI data centers, PC manufacturers and electronic companies may face significant price hikes. Analysts project the "super cycle" for storage chips will last at least until the end of 2027, with major pricing shifts in the industry. JPMorgan Chase highlights the critical roles of eSSDs and the soaring demand for these storage components, correcting the misconception that only HBM is driving the market. Citigroup is even more bullish, forecasting price increases and exponential growth in the storage chip sector for 2026, especially as AI technologies continue to drive demand for these essential components.