From "cyclical commodities" to "strategic core assets" JPMorgan: This storage supercycle will be "higher and longer"

The demand for AI is spreading from GPUs to CPUs, reshaping the fundamental logic of the global storage chip industry. According to Chase Trading Channel, JPMorgan Chase has significantly raised its forecast for the global storage market size in its latest research report and maintained a long-term bullish stance on the sector. It believes that storage chips are transitioning from traditional cyclical commodities to strategic core assets for AI infrastructure. JPMorgan Chase predicts that the total addressable market (TAM) for the global storage market will increase by 37% to 53% from its March model, reaching $1.7 trillion in 2028. The revenue for the DRAM market is expected to jump from $143 billion in 2025 to $636 billion in 2026, and further to $1.237 trillion in 2028. The NAND market revenue is also projected to increase from $71 billion to $454.5 billion during the same period. The firm predicts that the supply-demand gap will further widen in 2027, potentially providing additional upside for DRAM and NAND prices. However, the increase in long-term agreement (LTA) contract sales will help stabilize price trends. The core of the aforementioned forecast lies in the explosive growth in CPU computing demands, injecting a new variable into the narrative of AI storage demand that was previously dominated by GPUs. The value share of storage chips in cloud service provider (CSP) hardware capital expenditure has risen from just over ten percent in the early stages of the AI wave to over 50% this year. JPMorgan Chase points out that this structural shift is driving the market to reevaluate the valuation framework of storage stocks. Explosive CPU demand widens storage demand drive JPMorgan Chase's report highlights that AI computing demands are accelerating their shift from GPUs to CPUs, becoming the latest catalyst for the current storage uptrend. One of the biggest surprises in the 1Q26 financial quarter was the strong performance of CPU demand. CPUs play crucial roles in AGI systems, including task scheduling, state management, and API execution. Specifically, NVDA expects its standalone Vera CPU sales to reach $20 billion in 2026. AMD has significantly raised its forecast for server CPU market growth from 18% to over 35% annually, projecting a market size of $120 billion by 2030. INTC predicts that the ratio of CPU to GPU will narrow from about 1:8 to 1:4, hinting that they will eventually balance out as AI computing requirements continue to grow. From the perspective of the storage industry, the ratio between GPUs and CPUs continues to decrease from 5.4:1 in 2023 to 3.2:1 in 2025. JPMorgan Chase predicts that this ratio will further narrow to 2.4:1 by 2028, significantly driving AI server memory demand. The firm has raised its forecast for server memory demand from 5% to 22% between 2026 and 2028, emphasizing that over 60% of the increment in 2027-2028 comes from AI server (AI headnode and AI standalone CPUs) demand. As a result, AI server memory demand (excluding HBM) is expected to account for over 30% of total DRAM demand in 2027-2028, compared to the earlier forecast of 14%. HBM supply-demand remains tight, ASP upside opens The market for High Bandwidth Memory (HBM) is also experiencing continued tightening of supply-demand dynamics. JPMorgan Chase has raised its forecast for the HBM market size by 17% to 21% from 2026 to 2028, expecting the supply-demand gap to persist throughout 2028 at double-digit percentage levels. On the demand side, NVDA's Blackwell GPU shipments have been revised to 8.9 million / 9.9 million chips in 2026/2027 (previously forecasted at 7.5 million / 7.6 million chips). Alphabet Inc. Class C's TPU unit shipments are assumed to be 4.5 million / 8 million chips in 2026/2027, while Amazon.com, Inc.'s Trainium shipments have also been adjusted. The shipment of ASICs is expected to surpass commercial GPUs in 2027. In terms of pricing, JPMorgan Chase predicts that the average price of HBM will increase by 32% in 2027 compared to the previous year, reaching a historical high. This increase is primarily driven by a 19% increase in the price of HBM3E and a 15% increase in the price of HBM4, with HBM4E commanding a premium of up to 61% over HBM3E due to extreme supply chain constraints. The allocation of HBM in the DRAM wafer production capacity is expected to increase from 24% in 2026 to 31% in 2028, further exacerbating the supply-demand pressures on traditional DRAM. In terms of Samsung, JPMorgan Chase has increased its market share of HBM4 in NVDA customers by about a dozen percentage points in 2026 (HBM4-related wallet share is about 31%), believing that Samsung is ahead of its competitors in HBM4 certification progress and has already started shipping 12-layer 48GB HBM4E samples for certification testing. Storage becomes strategic asset for CSPs, valuation framework facing restructuring The strategic position of storage chips in AI computing systems is undergoing a fundamental transformation. JPMorgan Chase cites Micron's CEO statement that storage is becoming a strategic asset, and stable procurement is crucial for high-speed, high-quality operations of AI services. Data shows that the share of storage in CSP hardware capital expenditure has significantly increased from just over ten percent in the early stages of the AI wave and is expected to exceed 50% this year, with potential to reach 73% by 2030. At the same time, JPMorgan Chase predicts that the operating profit margin of the storage industry will remain stable at historical highs of 75% to 77% between 2026 and 2028, far surpassing the 30% in 2025. However, JPMorgan Chase also acknowledges that storage stocks are currently trading at a discount to earnings valuation levels, mainly due to investor doubts about whether the value share of storage can continue to increase. The report suggests that higher CSP hardware capital expenditures and more evidence from NVDA on the outlook for spending between $3 trillion to $4 trillion by 2030 will help alleviate market concerns about the sustainability of storage profitability. JPMorgan Chase points out that AI has brought about a new demand structure, and traditional cyclical valuation frameworks are no longer applicable, necessitating the adoption of new valuation methods. Enterprise SSD leads NAND expansion, supply discipline supports prices In the NAND market, enterprise solid-state drives (eSSDs) are becoming the core driver of market expansion. JPMorgan Chase predicts that the eSSD market size will exceed 500EB in 2026, accounting for 43% of total NAND demand, and is expected to expand to over 1100EB with a compound annual growth rate of 52% over the next two years. Considering the ASP premium, the value of the eSSD TAM is expected to exceed $300 billion in the next two years, surpassing the size of the HBM market. On the supply side, NAND capital expenditures are still below historical peak levels, and the increase in SLC demand further supports supply-demand balance. JPMorgan Chase predicts three-year cumulative capital expenditures for NAND to be $86 billion, mainly for technology migration, with the impact of new capacity construction expected to manifest as early as the second half of 2028. Compared to DRAM, the prioritization of capital expenditures among top manufacturers in NAND is relatively lower, but early signs of new capacity projects for 2029 have emerged. Accelerated capital expenditures, evolving competitive landscape in China In the face of a long-term shortage of supply and demand, storage companies are accelerating their capital expenditures. JPMorgan Chase predicts that global storage capital expenditures in the next three years will total approximately $450 billion, a significant increase from the $300 billion in the December 2025 model. Among them, cumulative capital expenditures for DRAM over three years are approximately $364 billion, with 60% of the incremental capacity allocated to HBM; NAND's three-year cumulative capital expenditures are around $86 billion. The purchase of EUV equipment and infrastructure construction are current major bottlenecks. For Chinese manufacturers, market share in the DRAM market is expected to increase from 6% in 2025 to 8% to 11% by 2028, while market share in the NAND market is expected to increase from 12% to 12% to 16%. The expansion speed of production capacity is higher than the industry average. However, due to the structurally lower-end product portfolio, there is limited room for growth in value share. It is estimated that by 2028, the value shares of DRAM and NAND will be approximately 10% and 12%, respectively. This article is reprinted from "Wall Street News" and edited by Jiang Yuanhua from GMTEight.