Samsung 1Q26 strong update strengthens the storage supercycle view
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Samsung 1Q26 strong update strengthens the storage supercycle view
Bank of America sees Samsung’s preliminary 1Q26 operating profit and DRAM/NAND pricing behavior as confirming a memory supercycle, and raises global memory expectations while staying positive on HBM and SK Hynix.
- Samsung’s preliminary 1Q26 OP was W57tn, up about 3x QoQ and 9x YoY, largely driven by strong DRAM and NAND ASP growth.
- BofA raised its global 2026-28 DRAM/NAND sales forecasts by 10%+/18%+, mainly on ASP assumptions that are higher than prior by more than 10%.
- The report expects 2026E global DRAM sales to grow 211% YoY and NAND sales to grow 197% YoY, and believes global DRAM TAM in 2026-28 could reach US$400bn+ and NAND could reach US$240bn+.
- HBM remains the most favored structural theme, with 2026/27E HBM TAM expected to be US$81bn/US$110bn, and SK Hynix leading the volume ramp with HBM3e and HBM4 production.
- Although short-term spot DRAM prices have fallen for consecutive periods, 2Q DRAM/NAND ASPs are still expected to rise about 30% QoQ, and the report views this as more likely a soft landing than a hard landing.
Report interpretation
Overview
This report uses Samsung Electronics’ 1Q26 optimistic preliminary earnings as the starting point and judges that the global storage industry has entered a supercycle. Bank of America argues that strong DRAM and NAND ASPs, tight commodity storage supply, capacity migration driven by HBM, and expanding AI server capex together support elevated 2026-2028 storage revenue, margins, and ROE.
Core views
Core views include: first, Samsung Electronics’ 1Q26 preliminary OP reached W57tn, validating DRAM/NAND pricing and profit leverage; second, 2026 DRAM and NAND sales are expected to approach triple growth, led mainly by ASPs rather than pure shipment volume; third, HBM demand is driven by AI GPU/ASIC/TPU, with 2026/27E TAM expected to expand to US$81bn/US$110bn; fourth, SK Hynix is identified as a top pick for global storage and Korean tech due to HBM leadership, expected 50-60% global share, high margins, and strong FCF; fifth, Nanya Technology benefits from legacy DRAM, but because ASP uplift assumptions for 2H26 and 2027 are conservative, 2026-27E EPS upside is only low single digits.
Analysis framework
The report combines top-down global DRAM/NAND market forecasts, company-level DRAM/NAND sales and margin comparisons, spot and contract trends in storage pricing, the BofA Memory Indicator, capex and capacity utilization, and AI server and hyperscale capex demand assumptions to cross-check the storage cycle.
Methodology notes
Storage cycle indicator
The indicator includes DRAM/NAND spot prices, ASP, billings, and Korean semiconductor exports; the report says the 2026 Feb reading reached 143, above the historical peak average of 126.
Top-down global storage forecast
Derives 2026-2028E global market size from DRAM/NAND ASP, bit growth, shipments, capacity, and capex assumptions.
Price objective based on 2026-27E EPS or P/E
The SK Hynix target price is based on 7x 2026-27E EPS; Samsung Electronics common share target price is based on 9x 2026-27E P/E; Nanya Technology target price is based on 11x 2026-27E P/E.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Samsung ElectronicsThe 1Q26 earnings update became a key trigger for the report to raise its sector view.
- Strengths
- Strong DRAM/NAND ASPs, common-share target price of W310,000, GDR target price of US$5,250; potential beneficiaries include HBM orders, 2nm foundry orders, legacy storage price increases, restructuring-driven cost cuts, and improved shareholder returns.
- Weaknesses
- OP growth may be limited sequentially after 2Q26, while foundry losses and high capex could weigh on valuation.
- Comparison
- Valuation uses 9x 2026-27E P/E, below the long-term historical average of 13x.
- Risks
- US tariffs, 12/16-hi HBM execution, storage price declines, large foundry losses, and aggressive capex increases.
- SK HynixPreferred pick for global storage and Korean technology in the report
- Strengths
- HBM leadership, expected to sustain 50-60% long-term global share; 2026-27E OP expected above W200tn and ROE above 50%, with annual FCF above W100tn.
- Weaknesses
- Sensitive to HBM demand and high ASP cycles.
- Comparison
- Target price of W1,650,000 is based on 7x 2026-27E EPS, below the 2016-25 average of 12x; the report sees room for rerating.
- Risks
- More aggressive capex by peers could create downside risk.
- Nanya TechnologyLegacy DRAM beneficiary
- Strengths
- 1Q26 sales of NT$49bn, up 7x YoY; DRAM ASP rose 65% QoQ in 1Q and is expected to rise a further 30% in 2Q.
- Weaknesses
- The report assumes limited ASP increase in 2H26 and 2027, so 2026-27E EPS revisions are only low single digits.
- Comparison
- Target price is NT$400, based on 11x 2026-27E P/E, above Korea peer storage peers because it is a pure legacy DRAM name.
- Risks
- Weakening legacy DDR4 demand, US tariffs with deep price cuts, and Chinese storage output expansion.
Key data
- Samsung Electronics 1Q26 preliminary OPW57tnUp about 3x QoQ and 9x YoY, driven by strong DRAM and NAND ASPs.
- SK Hynix price objectiveW1,650,000Raised from W1,400,000, reflecting 20%/19% upgrades to 2026/27E EPS and implying more than 50% upside.
- 2026E DRAM sales growth+211% YoYThe report expects 2026E DRAM sales to nearly triple, with ASP growth of 162% YoY as the main contributor.
- 2026E NAND sales growth+197% YoYThe report expects 2026E NAND sales to nearly triple, with ASP growth of 146% YoY as the main contributor.
- 2026/27E HBM TAMUS$81bn / US$110bnDriven by higher HBM usage in AI GPU/ASIC/TPU and volume ramping of HBM4 production.
- BofA Memory Indicator143 in Feb-26Above the historical peak average of 126 and at an all-time high.
- Hyperscale capexUS$600bn in 2026; US$750bn+ in 2027Combined 2026 capex growth for Amazon, Microsoft, Alphabet, Meta, and Oracle is expected to exceed 60% YoY.
Impact & implications
If the report’s view is correct, valuation of the global storage supply chain could be significantly repriced, especially for companies with HBM technology and capacity advantages. High ASPs, high utilization rates, AI server demand, and limited net new effective capacity would support elevated industry revenue, margins, and ROE through 2026-2028; however, whether price de-escalation transitions via a soft landing will be key to determining if the cycle persists.
Risks
- If DRAM/NAND spot prices continue to fall in the rest of 2Q or into 2H, and a soft landing turns into a hard landing, ASP and margin assumptions would be weakened.
- More aggressive capex expansion by peers could lead to a re-tightening of supply-demand balance.
- US tariffs, sharp price cuts, and expansion of Chinese storage capacity could compress industry margins.
- If HBM 12/16-hi execution, HBM4/HBM4e ramp, or customer qualification falls short of expectations, high-end storage growth would be affected.
- Smartphone and PC demand could weaken if storage shortages and high BOM costs cause production cuts, reducing part of end demand.
What to watch
- Samsung Electronics’, SK Hynix’, and Nanya Technology’s formal 1Q26 earnings and 2Q/2H26 guidance.
- Whether 2Q DRAM/NAND contract ASPs can continue to rise about 30% QoQ as expected.
- Whether the extent of DRAM/NAND spot price declines remains within a soft landing range.
- HBM4, HBM4e, and high-stack HBM production ramp, as well as changes in customer orders and GPU platform usage.
- Whether hyperscale capex and AI server shipments continue to support HBM and server DRAM demand.
- Whether the BofA Memory Indicator remains at historical highs or starts to roll over.