Nomura Securities) Hynix’s target stock price is

Nomura Securities) Hynix’s target stock price is raised to 540,000 won and Samsung Electronics to 123,000 won: Unexpected memory supercycle

There was market concern that competition among DRAM companies in the HBM market would intensify. This is because Samsung is likely to return to Nvidia’s HBM market in 2026. On the other hand, demand for DRAMs, SSDs, and other products for existing servers is expected to recover on the back of recovery in demand for existing servers. Since OpenAI launched ChatGPT in 2022, U.S. big tech companies have been developing capex plans and securing additional data center shells, which typically take more than two years to build. They are expected to significantly increase their investment from mid-2025 to 2026. However, the strength of the demand recovery appears to significantly exceed the previous expectations we presented in our report on Samsung and Hynix at the end of July.

While big tech companies have been quickly expanding their investment in AI servers, investment in traditional servers fell 30% year-on-year in 2023 and only started expanding about 15% this year, which will increase 20-30% in 2026.
As a result, we expect the demand for traditional server-related memory such as DDR4 and DDR5 to grow by about 50% in 2026, and the enterprise SSD (eSSD) demand used for both AI and traditional servers will almost double by 2026. We expect eSSD demand, which accounts for about 40% of total NAND demand, to grow by more than 100% by 2026, and NAND bit demand will grow by at least 50% year-over-year due to lack of HDD supply, generating demand from traditional servers and data centers. As a result, inventory levels will decline quickly, and we expect price increases to occur faster than previously expected. Overall, we expect facility investment in the memory industry to outpace previous projections.

The operating margin (OPM) of general-purpose DRAMs, currently around 40-50%, is expected to be close to its previous high (70% in 2017) by 2026. NAND operating margin is expected to break away from the current break-even level and enter a boom with a profit margin of 30-40% by 2026. This year, HBMs have seen polarized operating margins of between 30% and 70% by manufacturer. However, with Samsung’s entry into the HBM3E 12Hi and HBM4 12Hi markets, this margin gap may narrow to 45-65%. Nevertheless, we expect ultra-high profitability that exceeds the historical average of the DRAM industry.

The memory market will experience an unprecedented supercycle, raising Samsung and Hynix’s target price (TP) to W123,000 and W540,000 respectively.