The list of concerns is growing. How much longer can storage prices continue to rise?

Goldman Sachs recently released a research report stating that the fundamentals of South Korea’s storage chip industry remain strong, but investors’ list of concerns continues to grow.

The report indicates that Goldman Sachs’ team has held approximately 60 meetings and phone calls with investors over the past few weeks to discuss investment prospects in South Korea’s tech sector. Overall, investors remain optimistic about the storage industry, but their focus on multiple potential downside risks has noticeably increased.

Investors Still Favor Storage Industry, AI Demand Seen as Key Support

The report states that among all discussion topics, the storage industry remains the core focus for investors. Most investors believe that the current industry fundamentals are still solid, especially with continuous increases in storage prices and improved profitability, which keep market sentiment bullish.

However, compared to a few months ago, questions about potential risks have increased significantly. Major concerns include: AI capital expenditure slowing down, declining demand for smartphones and PCs, storage manufacturers aggressively expanding capacity leading to oversupply, spot storage prices potentially falling back, and from Q2 2026, a slowdown in storage price growth.

Despite this, most investors still believe that the industry fundamentals are at least healthy in the medium term.

Goldman Sachs states that even if some of these risks materialize, most investors are inclined to continue holding storage stocks, and may even add to their positions during pullbacks.

The only factor that could significantly change market sentiment is a noticeable decline in AI capital spending. If that occurs, investors generally believe that stocks across the entire tech supply chain could experience substantial corrections.

Storage Price Uptrend May Continue Until 2027

The report notes that during most meetings, one of the top concerns for investors was the magnitude and duration of the current storage price rally.

Investors generally believe that storage prices are likely to continue rising at least through the end of this year and may extend into 2027. Meanwhile, due to ongoing tight supply, short-term market expectations for prices could be further revised upward.

Overall, concerns about NAND supply are notably higher than those for DRAM, mainly because NAND has a lower technical barrier.

Strong HBM Demand Could Lead to Higher Prices

In the HBM (High Bandwidth Memory) sector, investors are focusing on the demand outlook for HBM3E and HBM4, as well as the competitive landscape.

Because HBM4 requires higher pin speeds and presents greater technical challenges, the market is watching for progress in technology development among various companies. If mass production of HBM4 proves difficult, it could further tighten supply and demand, supporting higher HBM prices.

Many investors believe that storage manufacturers may leverage several factors to push for higher prices: strong demand for HBM, ongoing tight supply for traditional DRAM, and the difficulty in ramping up HBM4 mass production.

Storage Capital Expenditures May Surpass Market Expectations

Capital expenditure is also a key focus for investors.

According to the report, due to tight supply and demand in DRAM, NAND, and HBM sectors, many investors believe that future capital spending in the storage industry could be higher than current market consensus.

In terms of valuation methods, investor preferences are shifting more toward price-to-earnings (P/E) ratios rather than the traditional price-to-book (P/B) ratios. This reflects increased confidence in the sustained profitability of storage companies.

This confidence is mainly driven by two factors: structural demand growth from AI and more restrained supply expansion within the industry.

Additionally, increased long-term supply agreements (LTAs) may reduce the volatility in demand seen in previous cycles.

Rising Attention on Samsung Electronics

On the stock-specific level, investors are generally positive on Samsung Electronics and SK Hynix, with no clear preference between the two.

However, compared to a few months ago, more investors are marginally more optimistic about Samsung Electronics. This is mainly because Samsung has greater exposure to traditional storage markets, shows stronger short-term fundamentals, and has made progress in HBM4 technology.

Meanwhile, investors still believe SK Hynix will maintain its leading market share in HBM over the next few years. Additionally, if the company advances its ADR listing in the future, it could benefit valuation.

Goldman Sachs points out that both companies are expected to generate significant free cash flow (FCF) in the future, and the potential for increased shareholder returns remains a key reason for investor optimism.

Among non-storage companies, Samsung Electro-Mechanics receives the most attention

In the non-storage sector, Samsung Electro-Mechanics has garnered the most focus. The report suggests this may be related to its stock price surging over 60% in February, compared to about 20% for the KOSPI index that month.

Investors are mainly watching two factors: the possibility of a new upward cycle in MLCC prices, and growth opportunities in ABF substrate business driven by AI server demand and new customers.

For LG Electronics, investors are primarily interested in the development potential of its robotics business and whether it can bring profit and valuation improvements. The market also monitors its home appliance and TV businesses amid rising costs.

For LG Display, discussions focus on the demand outlook for OLEDs in TVs, smartphones, and IT devices, as well as industry competitive dynamics.

Regarding LG Innotek, investors are paying attention to potential risks from rising storage costs, given the company’s significant exposure to smartphone camera modules. Progress in its ABF substrate business is also a key market focus.

Risk Warnings and Disclaimer

Market risks exist; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should determine whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Investment is at your own risk.