Bank of America: The storage industry is increasingly resembling "chip foundry" -- with weaker cyclicality and higher profit margins.

Bank of America Securities’ latest research report points out that the global memory chip industry’s business model is increasingly resembling the foundry chip industry, showing “foundry-like” characteristics of weakening cyclicality, stabilizing prices, and continually rising profit margins. This transformation is supported by multiple factors: since early 2026, spot prices for DRAM and NAND have continued to rise sharply, with DDR4 prices surging over 2000% in a single month; strong performance guidance from TSMC also confirms the high prosperity of the supply chain, especially favoring memory leaders like SK Hynix. According to Hard AI, during recent US East and West Coast roadshows, the Bank of America team observed that most investors agree the current memory cycle is much stronger than those in the past and have already reaped considerable returns. However, market sentiment is clearly divided: there are optimists who strongly believe in the long-term prosperity of the AI-driven industry, and cautious investors who worry about high valuations and the sustainability of subsequent momentum. Investors mainly focus on the following risks: after 2-3 years of growth, price-to-book ratios are at historical highs; capital expenditure continues to rise, with leading companies like Samsung Electronics significantly expanding production; the momentum for ASP (average selling price) increases might slow after 2H 2026; there are lingering memories of demand correction after the 2019 cloud hardware cycle; and there are structural contradictions between IT production rhythm and DRAM supply. Despite these concerns, the core logic proposed by the report—namely, that the memory industry is shifting to a “high-profit, stable price, weak cycle” operational model—still receives broad recognition. Even if ASP momentum weakens after Q2 2026, the industry is still expected to remain highly prosperous, forming a “super cycle” centered on profitability. Additionally, traditional DRAM capacity is rapidly being shifted to HBM or upgraded to high-end products like LPDDR5/GDDR7, and the sales trend of multi-chip integrated solutions is also continuing to grow. It is worth noting that some aggressive investors believe that if SK Hynix’s profitability can match TSMC, its market cap could reach one trillion dollars. However, the report also warns that the NAND market may face new supply and demand balance pressures by the end of 2026, as capacity is released and production migrates to the 200–300 layer process. TSMC’s Growth Guidance Favors Hynix, Samsung Under Pressure TSMC’s recent performance guidance is seen as a key indicator for the industry: the company expects compound annual revenue growth of 30% by 2026 and maintains an annual growth rate of over 20% through 2029, with annual capital expenditure remaining above $50 billion. This bullish outlook is closely linked to SK Hynix’s leading position in the HBM market, where it presently holds over 60% of global HBM supply share. This dynamic is reshaping the competitive landscape. TSMC, with its continued leadership in 2nm processes and CoWoS advanced packaging technology, has solidified its technological moat and constrained Samsung Electronics’ catch-up space in the foundry sector. The financial contrast is evident: Samsung’s foundry business remains loss-making, while TSMC’s operating margin has long exceeded 50%. Within this industry linkage, SK Hynix’s strategic status as TSMC’s core HBM supplier is further strengthened, consolidating its competitive advantage in the memory chip sector and fostering the formation of a closed-loop ecosystem from advanced processes and high-end packaging to high-performance memory. Spot Prices Soar, Supply Remains Tight The report notes that the DRAM spot market is experiencing extreme tightness. In the first half of January this year, DDR4 and DDR5 spot prices continued to be strong, with weekly increases of 10%, extending the cumulative rise of 100%–200% seen since Q4 2025. Specifically: 16Gb DDR5 spot price has reached $35.0, up 10% weekly, 238% quarterly, and as much as 647% year-on-year; 16Gb DDR4 spot price is at $75.8, up 7% weekly, 323% quarterly, and a dramatic 2315% year-on-year; 8Gb DDR4 spot price has climbed to $29.1, up 1886% year-on-year. It is notable that DDR4 spot price is showing a structural inversion: since June 2025, 16Gb DDR4 ($75) is already significantly higher than DDR5 of the same specification ($35), creating a rare price inversion phenomenon. This is mainly due to the three major memory chip manufacturers continuously shifting traditional DDR4 capacity to more advanced processes, resulting in perpetual tightening of DDR4 supply. Currently, manufacturers and OEMs are still worried about supply guarantees for traditional DRAM modules. The report forecasts further upward momentum for spot prices, even if the current surge is partly driven by speculative trading rather than entirely by real demand. Moreover, NAND spot prices likewise continue to rise, with weekly growth of 5-10%. Trade Data Confirms Industry Boom Korean semiconductor export data consistently validates the industry’s strong prosperity. In the first 10 days of January 2026, semiconductor exports reached $4.6 billion, a year-on-year surge of 46%. Though down 12% month-on-month, it remains at a historical high. Korean semiconductor exports have now registered year-on-year growth for 25 consecutive months, maintaining the fast-paced growth seen in November 2025 (+18%) and December (+46%). Looking ahead, investors are advised to focus on potential supply-demand opportunities in the NAND market in 2H 2026, and closely monitor the impact of expanded capital expenditures on the industry’s long-term profit structure. Overall, memory chips are undergoing a structural transformation toward a “foundry-like” model, driving the sector to break away from traditional cyclical valuation logic and initiate a sustained process of value re-rating. Risk Warning and Disclaimer Markets are risky, investment requires caution. This document does not constitute personal investment advice, nor does it consider the special investment targets, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this document fit their particular circumstances. If you invest based on this, you do so at your own risk.