Emotional volatility vs. performance validation, J.P. Morgan: Focusing on three key points for storage in Q2

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In the past three months, the US stock market storage chip sector has risen by 44%–184%, significantly outperforming the Philadelphia Semiconductor Index’s 20%–88% increase over the same period, but recent volatility has markedly intensified. The core market debate centers on whether the sentiment-driven trading enthusiasm can be substantiated by actual performance during earnings season.

On June 24, JPMorgan maintained its view of an “extended upward cycle,” saying that recent price fluctuations are more driven by sentiment and trading structure, not by deteriorating fundamentals, and the market is currently entering a concentrated window for validating earnings and guidance.

Regarding the nature of earnings in this cycle, JPMorgan focuses on three main lines of validation: the progress of long-term supply agreements (LTA), capital expenditure guidance from cloud service providers (CSP), and structural constraints on the supply side. These variables will collectively determine whether the pricing logic for the storage industry in the AI cycle enters a new stage of reassessment.

LTA Progress: Core Variable for Valuation Repricing

JPMorgan points out that the progress of long-term supply agreements (LTA) is one of the most important structural variables in the current storage cycle. Since May, LTA announcements have slowed significantly, but this does not signify a break in the trend—rather, it shows negotiations have entered a more complex stage.

The report shows that storage manufacturers are being cautious about price fixing, prepayment ratios, and contract protection clauses, while some corporate governance factors have also delayed the signing process. However, the market has already seen “breakthrough samples,” notably the strategic cooperation between Micron and Anthropic.

This agreement not only covers long-term supply arrangements for HBM, DRAM, and SSD, but also extends to deep binding in terms of equity and financing, which JPMorgan sees as a new type of “quasi-LTA structure”—signaling that the supply-demand relationship is evolving from pure supply toward a “capacity + capital” synergy.

Additionally, Samsung Electronics and SK Hynix are regarded as important strategic suppliers in the Anthropic ecosystem, further reinforcing the trend of long-term AI storage supply lock-in. JPMorgan expects the true window for large-scale LTA implementation will be concentrated in the second half of 2026, when US hyperscale cloud providers are likely to become the main contracting parties, pushing industry valuations into a new round of repricing.

CSP Capital Expenditure: AI Storage Share Accelerating Upward

The second main line comes from changes in capital expenditure structure of cloud service providers (CSP). The report shows the share of AI storage in CSP capital expenditure has rapidly increased from less than 20% in 2022 to an estimated 52% in 2026, and may further break through 70% in 2027.

The significance of this shift is that storage is gradually evolving from a “supporting link” in AI infrastructure to one of the core constraints affecting the pace of computing power expansion.

However, market disagreements around this trend are widening. On one hand, earnings expectations for storage manufacturers continue to be revised upwards; on the other hand, the market has started questioning whether such a high proportion of AI storage investment is sustainable, especially as AI commercialization returns are not yet fully realized.

JPMorgan believes this expectation gap will not close quickly. Historically, semiconductor earnings upgrades tend to lead capital expenditure confirmation, but the ultimate trend depends on cloud providers’ judgment of AI server architecture evolution and long-term ROI. Therefore, CSP CAPEX guidance in this earnings season will be the key variable determining the strength of market volatility.

Supply & Technology Path: HBM Expansion Coexists With “Efficiency Constraints”

The third key variable comes from structural changes on the supply side. Even though major storage manufacturers are accelerating production expansion, the industry as a whole still faces obvious structural constraints.

On one hand, SK Hynix’s DRAM monthly capacity is expected to reach about 630,000 wafers by year-end, and Samsung is continuously advancing construction of advanced manufacturing lines; but on the other hand, the cycle for building greenfield capacity is as long as 2–2.5 years, meaning supply flexibility still lags significantly behind the expansion in demand.

More importantly, HBM is reshaping the logic of “bit output efficiency.” Because of its higher value and complex packaging, the increase in HBM share actually suppresses overall bit supply growth to some degree, keeping the industry in a relatively low supply growth range.

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