South Korean brokerage: Samsung and SK Hynix have less than 10 days' worth of memory chip inventory, and next year may see the worst shortage in history.

South Korean brokerage: Samsung and SK Hynix have less than 10 days' worth of memory chip inventory, and next year may see the worst shortage in history.

The wave of investment in AI infrastructure is pushing the global memory chip market to the brink of an unprecedented supply crisis.

A research report released by KB Securities in South Korea on September 7 stated that Samsung Electronics and SK Hynix's current memory chip inventory has dropped to less than 10 days. Next year, the demand for DRAM and NAND flash memory will exceed supply by more than 10 percentage points, at which point the amount of memory chips available for actual sale may be exhausted. Kim Dong-won, head of research at KB Securities, characterized this situation as a "historic shortage."

The agency also pointed out that Samsung Electronics and SK Hynix's stock prices have fallen 38% from their highs in the past three months, and their price-to-earnings ratios for next year's earnings are only about 3 times, which is "extremely undervalued." The agency listed the two companies as the top picks in the semiconductor sector and expects a strong revaluation to begin soon.

AI investment surges, leading to a sharp expansion in demand for memory chips.

KB Securities points out that the investment scale of hyperscale cloud service providers in AI infrastructure next year is being significantly revised upward, increasing by about 60% compared to this year, and is expected to reach $1.3 trillion.

Kim Dong-won stated that the fundamental driving force behind this trend is that AI has begun to be rapidly implemented as a direct source of new revenue, such as cloud AI services, token billing, agentic AI, and model hosting, and the AI profit model is entering a stage of concretization.

The proportion of memory chips in AI infrastructure investment is rising rapidly.

KB Securities projects that this proportion will rise from 14% in 2024 to 40% in 2025, and further jump to 57% in 2026, expanding approximately fourfold in two years.

TrendForce, a global semiconductor research firm, has an even more aggressive forecast, predicting that this proportion will reach 68% by 2026, a nearly five-fold increase in two years. Kim Dong-won attributes this trend to the combined effects of increased HBM4 memory capacity, growing demand for CPU server DRAM, and simultaneous expansion of demand for enterprise-grade SSDs for inference.

HBM4 capacity expansion erodes general-purpose DRAM supply.

KB Securities specifically emphasized that the capacity expansion of sixth-generation high-bandwidth memory HBM4 will create structural pressure on the supply of general-purpose DRAM.

According to the agency's calculations, the production capacity required to produce one HBM4 wafer is equivalent to that of three general-purpose DRAM wafers. This means that for every step increase in HBM4 production, the available wafers for general-purpose DRAM are reduced by a factor of three.

With total wafer production limited, this structural contradiction will directly constrain the increase in available bits for the market, becoming one of the core causes of supply shortages next year. Kim Dong-won predicts that next year, the demand for bits in both DRAM and NAND will exceed supply by more than 10 percentage points, creating "the most severe supply shortage in history."

Samsung and SK Hynix face the risk of running out of supplies due to depleted inventory.

According to KB Securities, as of the third quarter of this year, Samsung Electronics and SK Hynix's memory chip inventory has dropped to less than 10 days. The current situation has gone beyond the scope of simple demand recovery, and the physical inventory available for sale is facing an absolute shortage.

Kim Dong-won stated that the possibility of running out of actual marketable storage capacity next year is becoming a reality.

Next year, AI servers will simultaneously absorb demand from HBM, server DDR5, and enterprise-grade eSSDs, with the combined demand from multiple product categories further exacerbating supply pressure. KB Securities believes that against this backdrop, memory chip prices have significant upside potential.

KB Securities is bullish on a revaluation after a sharp stock price correction.

Despite a more optimistic outlook for fundamentals, the share prices of Samsung Electronics and SK Hynix have fallen 38% from their highs in the past three months, with a price-to-earnings ratio of approximately 3 times for next year's earnings.

KB Securities believes that this valuation level is severely inconsistent with the expectation that the two companies will continue to break historical records for performance over the next three years and maintain a large-scale shareholder return policy, constituting "extreme undervaluation".

The institution has listed Samsung Electronics and SK Hynix as its top picks in the semiconductor sector, and expects the two companies to start a strong revaluation from their current extremely undervalued state.

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