Storage Price Hikes Surge AI Compute Costs, Raise Target Prices for Samsung/Hynix/Micron
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Storage Price Hikes Surge AI Compute Costs, Raise Target Prices for Samsung/Hynix/Micron
Report indicates massive HBM and traditional storage price increases causing hyperscale data center capex to rise approx 30%, triggering supply chain cost recalibration; maintains Overweight rating on Samsung, SK Hynix, Micron, and MediaTek based on revised earnings forecasts.
- HBM prices expected to increase 2-2.5x YoY by 2027 to narrow profit gap with traditional DRAM.
- Due to storage price hikes and GPU manufacturer surcharges, hyperscale data center AI capex needs to increase by approx 30%.
- FY2027 EPS forecast exceeds market consensus by 25%-40%, supporting stock price upside.
- Valuation method shifts from P/B to P/E, assigning 6.2x forward P/E to Samsung/SK Hynix and 7.7x to Micron.
- MediaTek benefits as it may be favored for direct procurement of HBM by hyperscalers to avoid surcharges.
- Kioxia has no HBM business to benefit from this price hike, maintaining Underperform rating.
Report interpretation
Overview
Bernstein releases in-depth report on the global storage industry, focusing on the impact of soaring memory prices on the AI industry chain. The report points out that due to shortages in traditional DRAM leading to skyrocketing prices and adjustments in HBM pricing mechanisms, AI data centers of hyperscale cloud vendors (Hyperscalers) face approx 30% cost pressure increase in capital expenditure. This will force supply chains to "recalibrate costs". Based on this logic, the institution significantly raised earnings forecasts and target prices for Samsung Electronics, SK Hynix, and Micron Technology, maintaining "Outperform" ratings; while looking favorably on MediaTek's opportunities under direct procurement models, but continuing to bear shorts on Kioxia lacking HBM business.
Core views
Core View 1: HBM prices are about to make up for significant growth lag to repair inverted profits vs traditional DRAM. From Q3 2025 to Q2 2026, traditional DRAM prices have risen approx 4.5x, while HBM prices did not follow suit as they are locked into annual contracts. Estimates show that revenue per wafer and gross margin generated by allocating capacity to traditional DRAM in 2026 are 2x and nearly 3x those of HBM respectively. To narrow this huge profitability gap, storage suppliers are negotiating 2027 HBM prices with GPU/XPU companies, expecting 2027 HBM prices to rise 2-2.5x YoY. Core View 2: Storage price hikes amplified by GPU vendor markups lead to significant AI capex pressure. Unlike traditional storage, HBM is encapsulated inside GPUs and belongs to Cost of Goods Sold (COGS) for vendors like NVIDIA. If NVIDIA wishes to maintain a 75% gross margin, it must pass on HBM cost increases by 4x to customers. Calculations show that only HBM price hikes and their markup effects could cause data center total capex to increase by 15%; combined with traditional DRAM and NAND price increases, total capex needs to rise approx 30% to cover higher memory costs. This will force hyperscale vendors to re-evaluate Return on Investment (ROI) and may result in cost redistribution within the supply chain. Core View 3: Earnings forecasts significantly revised upward, valuation system switches to P/E ratio. As HBM negotiations settle, institutions expect market consensus expectations for 2027 to quickly shift upward. Their FY2027 EPS forecasts exceed market consensus by 25%-40%. Given that current ROE and cash levels of storage enterprises will reach unprecedented heights historically, the traditional Price-to-Book (P/B) valuation method fails, so shifting to Forward P/E valuation instead. Assign 1-year forward P/E multiples of 6.2x for Samsung and SK Hynix, and 7.7x for Micron, corresponding target prices are 440k Won, 3.3M Won, and $1300 respectively, implying upside space of 15%-26%. Core View 4: MediaTek benefits from disintermediation trends, Kioxia marginalized. To avoid GPU vendor markups, some hyperscale vendors may prefer purchasing HBM directly from storage manufacturers. This model favors Asian ASIC service providers like MediaTek. Although MediaTek stock price has risen approx 130% recently, its execution on TPU projects is solid and there exists upside risk, thus maintaining "Outperform" rating. On the contrary, pure NAND supplier Kioxia does not involve HBM business and cannot enjoy this round of dividends, maintaining "Underperform" rating.
Analysis framework
The institution's analysis logic follows the logical chain of "Price Transmission-Cost Pressure-Earnings Reassessment-Valuation Switch". First, by comparing per-wafer revenue/gross margin data between traditional DRAM and HBM, identifying the structural contradiction of delayed HBM pricing, thereby deriving the inevitability of HBM catch-up. Second, introducing gross margin maintenance models of GPU vendors (e.g., NVIDIA), quantifying the amplification effect (4x markup) of HBM price hikes in the supply chain, and then calculating the specific impact on downstream hyperscale vendor capex (+30%). Finally, at the financial level, given the industry is at the peak of the super-cycle, ROE and cash flow far exceed historical means, decisively abandoning the failed P/B valuation anchor, turning to P/E valuation method which better reflects explosive current profits, and selecting historical cycle bottom P/E multiples to conservatively discount peak earnings to derive target prices.
Methodology notes
Switch to Forward P/E Valuation at Strong Cycle Peak
When enterprise ROE and asset quality reach historical extreme levels, Price-to-Book (P/B) often becomes distorted. The report chooses to use 1-year forward P/E combined with historical cycle bottom multiples to assess peak earnings. This is a conservative valuation technique commonly used at high points of cyclical stocks, aiming to smooth out valuation bubbles caused by cycle fluctuations.
Supply Chain Cost Amplification Effect Analysis
Analysis of how upstream raw material (HBM) price hikes are amplified by midstream integrators' (GPU vendors) pricing strategies (markups to protect gross margins) and finally transmitted to downstream customers (hyperscale cloud vendors). This multi-layered transmission analysis helps understand the real source of terminal cost pressure.
Per-Wafer Revenue and Gross Margin Comparison
By converting different products (HBM vs Traditional DRAM) into unified capacity units (per-wafer) for revenue and gross margin comparison, revealing the truth that seemingly hot HBM actual profitability is inferior to traditional products under current pricing, providing micro-fundamental basis for price renegotiation.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Samsung Electronics (005930.KS)Benefit: Dual driven by leading HBM technology (HBM4) and traditional DRAM price hike
- Strengths
- HBM4 shipments increasing, market share expected to rise; traditional DRAM high profit margin
- Weaknesses
- May allocate more capacity to traditional DRAM rather than HBM to pursue higher profits
- Comparison
- Ranked first with SK Hynix, same valuation multiple
- Risks
- Chinese storage advancement; demand peaking earlier than expected
- SK Hynix (000660.KS)Benefit: Core HBM supplier, large earnings elasticity
- Strengths
- Stable HBM market position, EPS forecast significantly raised
- Comparison
- Top tier allocation along with Samsung
- Risks
- Chinese storage advancement; demand peaking earlier than expected
- Micron Technology (MU.US)Benefit: Domestic US storage leader, following industry price hike cycle
- Strengths
- EPS forecast 38% higher than consensus, cash reserves accumulating rapidly
- Comparison
- Valuation multiple slightly higher than Korean vendors (7.7x vs 6.2x)
- Risks
- Chinese storage advancement; demand peaking earlier than expected
- MediaTek (2454.TW)Benefit: Hyperscale vendors may procure or cooperate directly with them to avoid GPU vendor markups
- Strengths
- TPU project execution solid, flexible ASIC service model
- Weaknesses
- Facing competition from Qualcomm in 5G market
- Comparison
- Distinguished from pure storage factories as ASIC service provider
- Risks
- Weak smartphone demand; slow 5G adoption
- Kioxia (4183.T)Detriment: Pure NAND supplier, no HBM business, unable to enjoy this round of HBM price hike dividends
- Weaknesses
- Simple product structure, lack of high value-add HBM
- Comparison
- Clearly lagging behind competitors owning DRAM/HBM
- Risks
- NAND demand growth falling short of expectations
Key data
- Traditional DRAM Price IncreaseApprox 4.5xPeriod Q3 2025 to Q2 2026
- 2027 HBM Price Forecast Increase2-2.5xYoY increase to narrow profit gap with traditional DRAM
- AI Data Center Capex IncreaseApprox 30%Affected jointly by HBM price hike, markup, and traditional storage price increase
- FY2027 EPS Premium over Consensus25%-40%Forecasts for Samsung, SK Hynix, Micron significantly higher than market consensus
- Samsung Target PriceKRW 440,000Corresponds to 6.2x 1-year Forward P/E, implies 26% upside
- SK Hynix Target PriceKRW 3,300,000Corresponds to 6.2x 1-year Forward P/E, implies 20% upside
- Micron Target PriceUSD 1,300Corresponds to 7.7x 1-year Forward P/E, implies 15% upside
Impact & implications
The report believes the surge in memory prices has spread from consumer electronics to AI infrastructure fields, becoming an不可忽视 cost burden for hyperscale vendors. This will prompt profound "recalibration" of the industry chain: hyperscale vendors may mix servers with different computing power to optimize costs, even attempt bypassing GPU vendors to purchase HBM directly. For storage giants, this is a significant earnings reassessment opportunity; stock prices will gain support in coming months as consensus expectations shift upward. However, this also means high HBM proportion may suppress overall profit margins in the short term until prices are fully straightened out.
Risks
- Favorable pricing environment ends early (due to demand weakening or supply increase)
- Investor sentiment changes leading to valuation pullback
- Technological advancement in China in storage fields (especially NAND) bringing competitive pressure
- MediaTek facing stronger competition from Qualcomm in 5G market and weak global smartphone demand
What to watch
- Progress of future months' HBM supply negotiations and final pricing
- Upward magnitude of sell-side consensus earnings forecast revisions for 2027
- Whether hyperscale vendors start attempting direct HBM procurement to avoid markups
- Continuous performance and market share changes of Samsung HBM4 export data