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Global investment banks Morgan Stanley and Nomura have sharply differing views on the sustainability of the artificial intelligence (AI)-driven memory chip boom, with their price targets for South Korean chipmaker SK hynix differing nearly threefold amid contrasting expectations over supply and profitability beyond 2027, according to a news report by The Korea Herald.
Morgan Stanley cut its target price for SK hynix by 38 per cent to 1.6 million won (USD 1,198) and for Samsung Electronics by 19 per cent to 309,000 won (USD 231.62), citing the risk of rising chip supply and delays in data centre construction in 2028. In contrast, Nomura retained its price targets at 4.7 million won (USD 3,521.62) for SK hynix and 670,000 won (USD 502.02) for Samsung Electronics. These are around 2.9 times and 2.2 times Morgan Stanley's revised targets, respectively. According to the Korea Herald, both investment banks expect strong earnings from the two companies next year. Morgan Stanley raised its 2027 operating profit forecasts for Samsung and SK hynix by 9 per cent and 13 per cent, respectively, but lowered its longer-term margin assumptions. "The most important debate in the memory market right now is whether we can avoid a 'cliff in earnings' in 2028," Morgan Stanley analyst Shawn Kim said in his report. The bank lowered its projected average operating margin for SK hynix between 2029 and 2035 to 28 per cent from 53 per cent, anticipating a return towards more historically typical profitability. Morgan Stanley's concerns partly centre on delays in data centre construction. It shifted around 4.9 gigawatts of capacity previously expected in 2028 to 2029, reducing its forecast for growth in annual global data centre capacity additions in 2028 to 9 per cent from 21 per cent. It also flagged the possibility of new memory production entering the market from late 2027, increased output from Chinese manufacturers and narrowing price premiums for high-bandwidth memory used in AI accelerators. Nomura, however, expects memory demand growth to exceed supply growth at least through 2028, supporting continued shortages and favourable pricing. It believes stricter US permitting requirements are more likely to delay or relocate data centre projects than lead to their cancellation. SK hynix has also secured agreements with 14 major customers covering volumes equivalent to more than half of its projected production capacity for 2027 and 2028. However, the pricing arrangements remain linked to market conditions, leaving the company exposed to potential price declines. Despite its cautious outlook, Morgan Stanley retained overweight ratings on both chipmakers and named Samsung its preferred semiconductor stock, citing its improving high-bandwidth memory position and earnings from businesses beyond memory chips. (ANI)
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