Citi reiterates Buy ratings on Samsung Electronics and SK Hynix, believing the memory upcycle is not over

Overview

This is a Citi research update on global semiconductors, especially Korean memory stocks. The core view of the report is that the recent share price pullback mainly stems from market concerns that the DRAM/NAND cycle has peaked, weak Chinese smartphone demand, and rising NAND channel inventories, but Citi's supply chain analysis shows that memory inventories are at extremely low levels and AI-related demand continues to reinforce supply-demand tightness.

Core views

Citi believes the memory upcycle remains intact. NAND and DRAM inventories across suppliers, hyperscaler customers, and channels are all significantly below normal levels; meanwhile, increased use of AI agents is driving KV cache demand, and growing demand for CMX and QLC SSD NAND as near-GPU storage solutions is expected to offset weak consumer NAND demand and drive continued undersupply. Based on this, the report reiterates Buy ratings on Samsung Electronics and SK Hynix.

Analysis framework

The report assesses supply chain tightness by comparing NAND/DRAM inventory weeks at suppliers, hyperscalers, and channels against normal levels; at the same time, it estimates incremental NAND demand based on AI server architecture, KV cache, CMX operations, and the use case of QLC SSD as near-GPU storage. On valuation, Samsung Electronics is valued using a sum-of-the-parts approach based on 2026E EBITDA, while SK Hynix splits HBM and commodity memory businesses and applies different EV/EBITDA multiples to each.

Methodology notes

• Valuation methodsSOTP

  sum-of-the-parts valuation

  Samsung Electronics' 12-month target price of W530,000 is based on a 2026E EBITDA SOTP method, with segments including Memory, Foundry, Display Panel, Mobile, and Consumer Electronics, referencing global peers' EV/EBITDA multiples.

• Valuation methodsSOTP with segment-specific EV/EBITDA

  separate valuation for HBM and commodity memory

  SK Hynix's 12-month target price of W3,100,000 is based on 2026E EBITDA, splitting the business into HBM and commodity/others; HBM is assigned 7.2x EV/EBITDA with reference to peers such as TSMC, while the commodity memory business is assigned 4.2x EV/EBITDA.

• supply_demandinventory weeks versus normal level

  inventory weeks versus normal levels

  The report compares NAND/DRAM inventory weeks at suppliers, hyperscalers, and channels against normal inventory levels to judge whether supply and demand are tight.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics (005930.KS)

  Covered company; report reiterates Buy rating

  Strengths

  Its memory business benefits from tight DRAM/NAND supply and demand; the target price uses a multi-business SOTP valuation covering Memory, Foundry, Display Panel, Mobile, and Consumer Electronics.

  Weaknesses

  Its businesses span memory, foundry, display, mobile phones, and consumer electronics, and some non-memory businesses may dilute its leverage to the AI memory upcycle.

  Comparison

  In the valuation, Memory is assigned 7.6x EV/EBITDA, Foundry 4.1x, Display Panel 0.5x, Mobile 4.8x, and Consumer Electronics 2.0x.

  Risks

  Delays in shipment approvals for HBM to key customers, weaker-than-expected PC sales, NAND demand falling short of expectations, aggressive investment by competitors depressing prices, intensified smartphone competition squeezing margins, and significant KRW appreciation affecting earnings.

• SK Hynix (000660.KS)

  Covered company; report reiterates Buy rating

  Strengths

  HBM and next-generation memory structural changes enhance the valuation logic, while AI-related memory demand reinforces supply-demand tightness.

  Weaknesses

  Sensitive to DRAM and NAND demand cycles, while commodity memory remains affected by macro consumer demand and inventory cycles.

  Comparison

  The valuation splits HBM and commodity/others, with HBM valued at 7.2x EV/EBITDA and commodity memory at 4.2x EV/EBITDA.

  Risks

  A downturn in DRAM demand, NAND demand weaker than forecast, and weak global consumption.

Key data

• NAND supplier inventory2.6 weeksBelow the normal level of about 5 weeks.
• Hyperscaler NAND inventory3.0 weeksBelow the normal level of about 7 weeks; hyperscalers are the main eSSD customers.
• NAND channel inventory5 weeksBelow the normal average level of about 15 weeks.
• DRAM supplier inventory2.7 weeksBelow the normal level of about 5 weeks.
• Hyperscaler DRAM inventory2.5 weeksBelow the normal level of about 7 weeks.
• DRAM channel inventory4 weeksBelow the normal average level of about 15 weeks.
• CMX NAND demand forecast2026E 34.6bn, 2027E 115.2bn 8Gb equivalentsEquivalent to about 2.8%/9.3% of global NAND demand in 2026E.
• Samsung Electronics target priceW530,00012-month target price, based on SOTP and 2026E EBITDA.
• SK Hynix target priceW3,100,00012-month target price, based on separate valuation of HBM and commodity memory.

Impact & implications

The investment implication of the report is that market concerns about the memory cycle peaking may be excessive. If inventories remain low and demand for CMX, KV cache, and QLC SSD materializes, the DRAM/NAND undersupply could persist, thereby supporting memory prices, earnings expectations, and valuation recovery for Korean memory stocks.

Risks

• Weak Chinese smartphone demand may weigh on consumer NAND prices.
• If NAND or DRAM demand falls short of forecasts, it may weaken the tight memory supply-demand thesis.
• Aggressive investment by competitors in memory semiconductors or foundry may put pressure on prices.
• Delays in shipment approval for Samsung Electronics' HBM to key customers may affect realization of its target price.
• Weak global consumption, weaker-than-expected PC sales, and significant KRW appreciation may all pressure earnings.

What to watch

• Whether NAND/DRAM inventory weeks at suppliers, hyperscalers, and channels continue to remain below normal levels.
• AI agent usage, KV cache demand, CMX deployment, and the adoption pace of QLC SSD for near-GPU storage.
• SSD configuration and actual order pull-in pace for Nvidia Vera Rubin-related servers.
• Progress in shipment approval for Samsung Electronics' HBM to key customers.
• Chinese smartphone demand, PC sales, and global consumption trends.