The Zhitong Finance App learned that J.P. Morgan Chase released a storage industry report stating that the overall performance of storage manufacturers in the third quarter of 2026 was positive, DRAM prices and HBM4 progress continued to exceed expectations, and NAND showed no signs of a short-term price reduction or downward cycle; however, storage stocks retreated by about 45% from the 2026 high, and the valuation had fallen to less than 3.5 times the expected price-earnings ratio in 2027. The market was still fluctuating amid concerns about the sustainability of AI financing, HBM downgrades, and the peak cycle. J.P. Morgan maintains “excess” ratings for SK Hynix ADR (SKHY.US), Samsung Electronics, and Kioxia. The target prices are $260, 400,000 won, and 43,334 yen, respectively. For the next three months, the bank's preferences are SK Hynix ADR, Samsung Electronics, and Kioxia.
Overall results for the third quarter were positive, and individual companies faced short-term disturbances
According to the report, the overall performance of storage vendors in the third quarter of 2026 was better than expected: under the headwind of exchange rates, earnings per share and profit margins still exceeded expectations, rising pricing, successful HBM price negotiations, and smooth shipping and delivery. Some companies have short-term disruptions: Samsung Electronics lacks upcoming shareholder return arrangements, and Kioxia's guidance for the fourth quarter of 2026 is weak; however, J.P. Morgan believes this is a temporary phenomenon — Samsung Electronics' shareholder return catalyst should return in January 2027, and Kioxia's growth in the first quarter of 2027 should be higher than seasonal levels and lead the industry.
Terminal demand signals are still divided: on the B2B side, AI capital expenses of hyperscale cloud vendors are growing steadily, and the market's consensus expectations for next year have improved; on the B2C side, the PC and mobile phone businesses are facing greater challenges. Despite this, J.P. Morgan believes that the fundamentals of bottom-up storage supply and demand will remain very stable until 2028.
DRAM prices surpassed expectations again, with strong shipping guidance for the fourth quarter
DRAM prices once again exceeded expectations in the third quarter. DRAM ASP rose 23% month-on-month, higher than J.P. Morgan's previous expectations of about ten to 20% higher, driving the performance of various companies to moderately exceed expectations. The incremental surprise comes from the fourth quarter bit shipping guidelines: storage vendors are leading to double-digit month-on-month growth, and the industry is likely to achieve a 20% higher year-on-year bit-shipment growth rate by the end of 2026.
On the HBM4 side, storage vendors have begun shipping, and it is expected that HBM4 will surpass HBM3E in terms of bits and revenue in the third and fourth quarters of 2026, respectively. More importantly, after successful price negotiations, manufacturers expect the profit gap between HBM and traditional DRAM to narrow in 2027. J.P. Morgan previously suggested that the aggressive rise in HBM ASP may be a double-edged sword — boosting storage profits on the one hand, and disrupting demand; however, comprehensive and smooth negotiations mean that end customer risks are generally manageable. J.P. Morgan predicts HBM ASP to rise 96% in 2027.
Vendors have agreed that demand will still exceed supply after 2027, and some vendors have even indicated that storage has actually been sold out in 2027. J.P. Morgan believes that at a time when the market is worried about AI financing and sustainability, once profits begin to prove resilient, this guidance should ease concerns. At the industry level, DRAM supply and demand are expected to be tight until 2028, and more than 75% of production capacity has been locked in the 2027 fiscal year.
NAND shows no signs of a price reduction/downward cycle in the short term
Due to inventory accumulation and increased production capacity in China, the market believes that NAND will enter a downward price cycle as early as the fourth quarter of 2026, but J.P. Morgan believes that the fundamentals of the NAND industry are resilient, and there are no signs of a recent price reduction or downward cycle. The report admits that price increases have indeed slowed, but Kioxia's December quarter guidance fell short of expectations, mainly due to the company's own problems: there was early delivery in the September quarter, and some demand was postponed to next March quarter.
The NAND industry's bit-shipment outlook is divided: Micron is leading to mid-term growth of up to 20% in 2027, and SK Hynix is in the upper ten ranges. J.P. Morgan believes this is mainly due to differences in when production capacity climbs. Structurally, demand for ESSD driven by KV-Cache offload continues, and cost-effective NAND solutions will continue to attract cloud service customers for AI model optimization. According to research, Chinese NAND manufacturers mainly focus on consumer applications, and the threat to international eSDD demand is limited.
Long-term agreement (LTA) coverage is expanding
In the third quarter results, each storage vendor expects more customers to be included in LTA contracts in 2027. Samsung Electronics and SK Hynix have both expanded the range of LTA customers, and some contracts will be extended beyond 2030. Storage vendors generally expect at least 50% LTA coverage in 2027/2028; Samsung Electronics is the most active, emphasizing that LTA coverage rate of 60% to 70% by 2030.
All in all, J.P. Morgan believes that storage fundamentals are stable and prices are expected to remain high in 2027, but there is a lack of catalysts, and related companies' stock prices may fluctuate in the short term; medium-term risk returns are still attractive, maintaining a “gain” rating for all covered companies. The preferred order for the next three months is SK Hynix ADR, Samsung Electronics, and Kioxia.