Two opposing views on price targets
Global investment banks Morgan Stanley and Nomura are sharply divided over how long the AI-driven favorable cycle for memory chips in South Korea will last. According to The Korea Herald, their price targets for SK hynix are nearly three times apart, due to opposing expectations for the sector's profitability beyond 2027.
Morgan Stanley on Monday cut its target for SK hynix by 38 percent to 1.6 million won, and its target for Samsung Electronics by 19 percent to 309,000 won. It cited two reasons: increased chip supply and delays in data center construction, with effects expected in 2028. Nomura, in a report released Thursday, instead confirmed targets of 4.7 million won for SK hynix and 670,000 won for Samsung, values 2.9 and 2.2 times higher, respectively, than Morgan Stanley's revised estimates.
The 2028 crux and memory supply
Both banks expect solid earnings next year. Morgan Stanley raised its 2027 operating profit forecasts for Samsung by 9 percent and for SK hynix by 13 percent, but sharply lowered its long-term margin assumptions. Analyst Shawn Kim described the ability to avoid a so-called earnings cliff in 2028 as the central question for the market. For SK hynix, the projected average operating margin between 2029 and 2035 falls from 53 to 28 percent, assuming a return to profitability levels closer to historical ones.
Morgan Stanley's revised model shifts about 4.9 gigawatts of data center capacity previously expected in 2028 to 2029, reducing growth in global annual additions from 21 to 9 percent for that year. Annual additions would still rise to 43.3 gigawatts in 2028, but new memory production coming onto the market from late 2027 could begin to fill demand. Higher output from Chinese manufacturers and declining premiums for high-bandwidth memory used in AI accelerators could also weigh on prices.
Nomura's thesis and SK hynix's contracts
Nomura reaches different conclusions in its global memory report of October 19. By cross-referencing data center construction forecasts with estimates of installed memory per system, the Japanese bank expects demand growth to outpace supply at least through 2028, sustaining shortages and favorable prices. Nomura expects annual capacity additions at global data centers to rise from 22.3 gigawatts in 2026 to 31.5 gigawatts in 2027, and believes stricter U.S. permitting requirements tend to delay or shift projects rather than cancel them.
SK hynix has long-term commitments with customers that could offer partial protection against a weakening in demand. In its October 28 earnings announcement, the company disclosed agreements with 14 major customers for volumes equivalent to more than half of its planned production capacity for 2027 and 2028. The contracts include pricing terms that reflect market conditions within a range agreed with customers, thus leaving some exposure to future price declines. It remains to be seen which of the two readings of supply and demand beyond 2027 will be confirmed by industry data.
