This time is really different! Storage chip removes the "cycle" label and enjoys the "AI infrastructure super dividend" to the fullest.

In the just-passed year of 2025, storage chip stocks as well as high-end storage products stocks were undoubtedly one of the hottest investment themes in the global stock market, and the trend continues in the opening of 2026 for example, the leader in enterprise SSD storage components for data center, SanDisk (SNDK.US), has seen a cumulative increase of over 110% since the start of 2026, with a staggering 580% increase in SanDisk's stock price for the full year of 2025. Even after experiencing the soaring trend of the 2025 super bull market, and the continued bullish momentum in the opening of 2026, global investors have not been overly concerned about the suddenly surging valuations of these storage technology companies, because they believe that the unprecedented frenzy of AI data center construction is changing the "cyclical nature" of the storage chip field. Since the end of 2024, SanDisk (SNDK.US), Western Digital Corporation (WDC.US), Seagate (STX.US), and Micron Technology, Inc. (MU.US) have become the best-performing constituent stocks in the S&P 500 index, investors continue to consider them as extremely attractive stock allocation objects. Furthermore, even though from the perspective of historical stock prices and valuations, they may appear increasingly expensive, the almost "indefinite belief" in the AI investment theme is making these historical comparisons irrelevant. In the past year's bull market for storage stocks, in addition to the sharp rise in stock prices for the three major original storage chip manufacturers SK Hynix, Samsung, and Micron, the stock prices of Seagate, SanDisk, and Western Digital Corporation have all risen by more than 200% in 2025, with enterprise-level SSD storage leader SanDisk seeing a staggering nearly 600% increase. These three giants in the storage chip and product line sector have significantly outperformed the US stock market and even the global stock market. The core logic behind the strong rise in stock prices of these three storage product giants lies in the fact that the frantic construction of AI data centers not only drives the surge in HBM storage demand, which leads to the migration of storage chip production capacity from consumer electronics to the much more complex HBM end of manufacturing and testing processes, the three-tier storage stack in AI data centers (hot layer NVMe SSD, warm layer/near-line HDD, cold layer objects and backup) are also expanding exponentially in sync, while the long-term supply constraints in the HDD industry combined with the NAND cycle warming and the lock-in demand from cloud vendors over many years have enabled these three companies to soar in terms of volume, price, and order visibility simultaneously. As shown in the above chart, storage chip stocks and storage-related tech stock prices have continued to soar the incredibly strong demand associated with AI training/inference has been driving the robust growth of this group. The data in this chart is standardized based on the percentage increase as of July 21, 2025. Whether it is Alphabet Inc. Class C's massive TPU AI computational cluster, or the massive NVIDIA Corporation AI GPU computational cluster, both require fully integrated HBM storage systems loaded with AI chips, as well as current tech giants accelerating the purchase of server-level DDR5 storage and enterprise-level high-performance SSD/HDD for new or expanded AI data centers; Samsung Electronics, SK Hynix, and Micron Technology, Inc., along with the three storage product leaders that are concentrated or focused on certain subcategories within these three core storage areas: HBM, server DRAM (including DDR5/LPDDR5X), and high-end data center-level SSD/HDD, are the direct beneficiaries in the "AI memory + storage stack", enjoying the "super dividend" of the AI infrastructure wave. On Wall Street, Morgan Stanley, Nomura, and Bank of America Corp are calling for the full arrival of the "storage chip super cycle" driven by the AI wave, and they believe that the strength and duration of this cycle may far exceed that of the "super bull market in storage driven by the cloud computing era" in 2018. Global funds' extremely bullish sentiment on storage chips has propelled the benchmark stock index of the Korean market the Kospi Korea Composite Index, to surge by 76% in 2025, making it the wildest stock market globally in 2025, mainly due to the surging trends of the two dominant weighting stocks with a combined weight of over 30% the global storage chip leaders SK Hynix and Samsung Electronics, which contributed nearly half of the cumulative increase in the two storage chip giants. On January 22, 2026, the Kospi Korea Composite Index surpassed the epic 5000-point mark, reaching a new historical high, also benefiting greatly from the strong trend of the two heavyweight stocks, SK Hynix and Samsung Electronics, in the storage chip industry since the beginning of this year. SSD solution provider Kioxia, headquartered in Japan, announced on Thursday that the company's NAND flash production capacity for 2026 has been fully sold out, and it is expected that the tight supply situation of NAND flash will at least last until 2027. A recent storage chip industry tracking research report released by the financial giant Nomura Securities showed that the strong resonance and driving force of the surge in demand for enterprise-level high-performance server-level DRAM+HBM storage systems+data center high-performance SSD brought about by the "super-accelerated progress of global AI data center construction" has led to a steep slope in the price increase of DRAM/NAND storage chips. Analysts from Nomura also judged that this round of the "storage chip super cycle" that started in the second half of 2025 will last until at least the end of 2027, and meaningful additional supply is not expected to appear as early as the beginning of 2028. Nomura stated that investors should continue to be overweight in storage leaders in 2026, using the "price-profit-valuation" triple hit of storage chips as the main investment theme for 2026, rather than treating storage as a single theme of HBM only. The institution expects the profitability of the three major storage chip companies to reach record highs. The strong and sustained demand for DRAM/NAND storage chips, as well as the brutal expansion of the prices of these storage product series (such as DDR4/DDR5/enterprise-level SSD series), is mainly driven by the surge in demand for storage chips and the importance of storage chips for AI training/inference systems brought about by the flood of AI computational power. The global demand for AI computational power is showing an exponential growth trend, and the supply of computational power is far from meeting the intensity of demand, which can be clearly seen from the incredibly strong performance data announced last week by the "global chip king" Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US). In the fourth quarter, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's gross margin broke 60%, net profit greatly exceeded expectations, with a forecast of nearly 30% year-on-year revenue growth for 2026, and a significant upward revision of the capital expenditure guidance for 2026 to $52-56 billion, these two core indicators far exceeded market expectations, in addition, the management of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR further revised its Composite Average Percentage Growth Rate (CAGR) for its chip manufacturing business closely related to AI from the original "mid-40s%" to the "mid-to-high 50s%". The incredibly strong performance and future outlook of this global largest-scale chip manufacturer has driven a collective surge in stock prices of chip stocks in the recent period, particularly storage chips and semiconductor equipment with the most forceful rise. This time it's different! AI is reshaping the global storage chip market, tearing down the typical label of "cycle" "The whole script about how to look at the storage cycle has been forcefully torn down," said Joe Tigay, portfolio manager at Equity Armor Investments. "This is a Shanghai New World, with a clearly higher bottom, meaning that the trend of expensive prices and valuations will be more sustainable than in previous cycles. The world's largest tech companies, with unimaginably deep pockets, will be fiercely competing for storage products for quite some time." After SanDisk (Sandisk) was spun off from Western Digital Corporation (Western Digital) last year, its stock price has soared, with a strong rise at the beginning of 2026, reaching an increase of 111%. However, the stock is currently trading at an estimated 23 times earnings, which is still lower than the similar type valuation multiples of approximately 25 times for the Nasdaq 100 index dominated by tech stocks. Seagate's valuation multiple is about 24 times, and the stock price of the only US-based storage chip manufacturer Micron Technology, Inc. even after a large increase of 36% in January, is still one of the 10 cheapest stocks in terms of valuation measurement below the Nasdaq 100 index's benchmark of price/earnings ratio, with Micron Technology, Inc.'s expected price/earnings ratio being less than 11 times. For most companies, these valuation levels are not seen as "excessively high." However, due to the typical cyclical nature of storage chip/storage product stocks, they have historically received relatively low market valuations. Of course, from the perspective of other valuation measures or technical indicators, these storage type stocks do indeed appear to be expensive. SanDisk, Micron, and Western Digital Corporation's "14-day Relative Strength Index" (14-day RSI) is at significantly "overbought" levels according to technical traders, and Seagate is also approaching this "overbought" technical indicator. The stocks of the three major storage chip manufacturers, Samsung, SK Hynix, and Micron, as well as the leaders in storage products like SanDisk and Seagate, have closely followed the prosperity and downturn cycles of the industry. For a long time, the demand for storage products has been highly dependent on the personal computer industry, and more recently on the smartphone business. The short-term volatile fluctuations in these consumer electronics markets have made it difficult for storage chip/storage product manufacturers to pinpoint the exact timing for new supply inputs, leading to long-term cyclical oversupply. Due to the aggressive rate hikes by the Federal Reserve impacting consumer electronics demand and the rare inventory accumulation trend during the pandemic, Micron remained in the red in 2023, while Western Digital Corporation and Seagate also suffered continued significant losses in 2023 and 2024. The cyclical nature has significantly suppressed the expansion trend of valuation multiples traditionally, mainly because investors expect a sharp downward trend in earnings erosion after an uptrend. However, with the emergence of large AI models and applications such as ChatGPT, the demand pattern for storage chips has fundamentally changed: the world's largest tech companies are actively investing in building large-scale infrastructure for this technology, and storage chips and other storage component products are essential components of this. This background is expected to persist at least until 2027, accelerating market size growth and sustaining the continuous surge in storage product prices; an index measuring the spot price of DRAM has risen significantly in recent months. As shown in the chart above, the prices of various types of storage chips for computers continue to soar, especially the spot price of DDR5 16G memory components for enterprise storage has shown the most intense surge. "This time is really different," said Francisco Jeronimo, an analyst from IDC, referring to the unprecedented scale of the recent surge in storage chip/product prices as a "crisis" facing some hardware manufacturers. "This is not a normal cycle. This is a deep, long-term change, and it could last for two to three years." Although the phrase "this time is different" is often associated with market tops, Jeronimo believes that the crucial role of storage chips in AI infrastructure construction may permanently elevate the bottom of storage chip/storage product prices. "Even if the AI bubble bursts, or AI storage demand slows down, I don't think prices will return to the levels of six months ago," he said. The market is still underestimating storage demand! Wall Street's bullish sentiment on storage chips is becoming increasingly frenzied This optimistic sentiment is not unique to Jeronimo among senior market professionals. BNP Paribas upgraded Seagate's stock rating to "outperforming the market" last Wednesday, with analyst Karl Ackerman believing that "strong data center storage demand may drive a new upturn cycle to last longer than we initially expected" with "stronger and more solid confidence," and therefore "it is very reasonable to re-evaluate Seagate and Western Digital Corporation above 20 times structural valuations." Wall Street analysts are becoming more positive about the fundamentals and stock prospects of core companies in the storage chip/storage product sector. According to Bloomberg's data compilation, in the past three months, Wall Street analysts have raised their consensus forecast for SanDisk's 2026 earnings per share to a record 172%, with revenue expectations raised by over 21%. Micron's expectations have also been significantly revised upward by analysts. Nomura's latest assessment shows that the firm has reiterated that this "storage chip super cycle" will last at least until the end of 2027, and their report explicitly states that "meaningful supply additions will be no earlier than 2028." The report repeatedly emphasizes that the expansion of storage chip and HDD/SSD storage component production capacity is not a matter of "talk expansion," but a matter involving the pacing of upgrades for greenfield/brownfield/customized semiconductor equipment. Taking SK Hynix as an example, Nomura precisely focuses on the constraints of production capacity involving clean room cycle/ wafer production capacity, delays brought about by advanced process upgrades, and restrictions on construction/upgrades of overseas chip factories, thereby deducing a slower increase in supply and a longer duration of the gap. Analysts at Citi Group, in their latest prospects, are showing a more aggressive bullish stance than Nomura Securities. They believe that due to the widespread adoption of AI Agents (i.e. AI intelligent agent workflow) and the surge in AI CPU memory demand, storage chip prices will experience an uncontrollable surge in 2026. Citigroup's analysts have raised their price increase forecast for the average selling price (ASP) of DRAM in 2026 from the original 53% surge to a violent 88%, and their forecast for the surge in NAND has been raised from 44% to 74%. Citigroup's analysts expect that driven by the dual push of AI training and inference demand, the ASP of server DRAM in 2026 will surge year-on-year by 144% (previously forecasted as +91%); taking the mainstream product 64GB DDR5 RDIMM as an example, Citigroup forecasts its price to reach $620 in the first quarter of 2026, an increase of 38% compared to a previous forecast of $518. In the NAND field, Citigroup's forecast is equally aggressive, with the ASP growth expectation for 2026 raised from +44% to +74%; among them, the ASP of enterprise-level SSDs is expected to increase by 87%. In the view of Citigroup's analysts, the storage chip market will enter an extremely fierce seller's market, with the pricing power completely in the hands of the three: Samsung, SK Hynix, Micron, SanDisk, and other storage giants. Divya Mathur, an emerging market stock fund manager at ClearBridge Investments, recently stated that storage chip stocks and high-end storage product stocks are the most worthwhile areas to invest in the global stock market, emphasizing that the market continues to underestimate the intensity of demand for storage chips from the AI infrastructure. Divya Mathur's ClearBridge SMASh Series Emerging Market Equity Fund has outperformed over 97% of its peers in the past year according to institutional compiled stock fund performance data, with a massive bet on the storage chip giants Samsung Electronics and SK Hynix whose stock prices doubled in 2025, and nearly quadrupled in 2025, respectively. Mathur expects this bullish trend to persist in the long term, stating that the AI wave will permanently reshape this industry that has long been considered cyclical and commoditized. "Since the semiconductor era, the storage chip industry has never been built for the data storage needs of the AI field but over the past year or so, we have seen this new growth DRIVE come in," said senior fund manager Mathur, one of the specialist fund managers at the global asset management giant Franklin Templeton, managing this emerging market stock investment fund with a size of around $1.4 billion. Since 2015, he has held these two storage chip stocks for the long term, and his confidence in them has become increasingly firm and long-term. "Furthermore, from the information I have received, some American tech customers have indicated that the storage industry is only in the second year of a ten-year super upgrade cycle." he said in a media interview. "However, the unprecedented scale of recent price hikes in the storage sector is enough to make investors wary." said Mark Bronzo, Chief Investment Strategist at Rye Strategic Partners. He agrees that storage chip/storage product prices will continue to remain strong, supporting their earnings base. "The fundamentals look so strong that I don't know who would be a seller. I think any weakness will be fully covered by buying on dips as long as they see weakness," he said.