The list of concerns keeps getting longer—how much longer can storage prices keep rising?

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Goldman Sachs recently released a research report stating that the fundamentals of Korea's memory chip industry remain strong, but the list of investors' concerns continues to grow.

The report notes that the Goldman Sachs team held around 60 meetings and calls with investors in recent weeks to discuss investment prospects in Korea’s technology sector. Overall, investors remain optimistic about the memory industry, but their attention to multiple potential downside risks has clearly increased.

Investors overall remain bullish on memory industry; AI demand still seen as key support

The report says that among all discussion topics, the memory industry is still the core focus for investors. Most investors believe that current industry fundamentals remain solid, especially with ongoing memory price increases and improved profitability, which maintains a bullish market sentiment.

However, compared to a few months ago, investors' questions about potential risks have noticeably increased. Major concerns include: a possible slowdown in AI capital expenditure, declining demand for smartphones and PCs, memory manufacturers' aggressive capacity expansions leading to increased supply, potential pullback in memory spot prices, and the possibility that memory price increases may slow from the second quarter of 2026.

Despite this, most investors still consider industry fundamentals healthy at least in the mid-term.

Goldman Sachs states that even if some of these risks materialize, most investors still tend to hold memory stocks, or even increase positions during a correction.

The only factor likely to change market sentiment is a significant drop in AI capital expenditure. If this happens, investors generally believe that the entire tech supply chain’s stocks could undergo a substantial correction.

Memory price upcycle may last until 2027

The report reveals that one of the most concerned questions among investors is how much memory prices will rise this round and how long it will last.

Investors generally believe that memory prices are likely to continue rising for at least the whole year, possibly extending until 2027. Meanwhile, given ongoing tight supply in the industry, short-term market price expectations may be further upgraded.

Overall, investors’ concerns about NAND supply are noticeably higher than DRAM, mainly because the technology threshold for NAND is relatively lower.

Strong HBM demand may bring higher pricing

In the HBM (High Bandwidth Memory) sector, investors focus mainly on demand prospects for HBM3E and HBM4, as well as the competitive landscape.

Since HBM4 requires higher pin speed and is more technically challenging, the market is watching companies’ progress in technology advancement. If mass production of HBM4 proves difficult, this may further strengthen supply-demand tightness and support price increases for HBM.

Many investors believe that memory manufacturers may leverage the following factors to pursue higher prices: strong HBM demand, ongoing tight supply for traditional DRAM, and the difficulty of scaling HBM4 mass production.

Memory capital expenditure may exceed market expectations

Capital expenditure is also a focus for investors.

According to the report, due to tight supply-demand in DRAM, NAND, and HBM, many investors believe that future memory industry capital spending could exceed current market expectations.

Regarding valuation methods, investor preference is changing. More investors are paying attention to price-to-earnings (P/E) valuation rather than the traditionally used price-to-book (P/B). The reason is rising confidence in the sustainability of earnings by memory firms.

The analysis suggests that this confidence comes mainly from two areas: structural demand growth from AI, and more restrained supply expansion within the industry.

In addition, an increase in long-term supply agreements (LTA) may lower the degree of demand fluctuations seen in past cycles.

Rising attention on Samsung Electronics

According to the report, at the individual stock level, investors have an overall positive attitude toward both Samsung Electronics and SK Hynix, with no obvious preference.

However, compared to a few months ago, more investors have become marginally more positive on Samsung Electronics. This is mainly because Samsung has greater exposure to the traditional memory market, shows stronger short-term fundamentals, and has made progress in HBM4 technology.

Meanwhile, investors still generally believe SK Hynix will remain the market share leader in HBM in the coming years. If the company promotes ADR listing in the future, it may also benefit its valuation.

Goldman Sachs notes that both companies may generate considerable free cash flow (FCF) in the future, and enhanced shareholder returns are also a key reason why investors remain optimistic.

Among non-memory companies, Samsung Electro-Mechanics attracts most attention

Among non-memory companies, Samsung Electro-Mechanics received most attention. The report says that this may be related to the sharp rise in its stock price in February—the monthly increase exceeded 60%, while the KOSPI index rose by about 20%.

Investors mainly focus on two factors: the possibility that MLCC prices may enter a new round of increases, and growth opportunities for the ABF substrate business brought by AI server demand and new customers.

For LG Electronics, investors mainly focus on the potential for development in the robotics business and whether this can bring profitability and valuation improvements. The market also watches the profitability outlook for its home appliance and TV businesses given rising costs.

For LG Display, discussions focus on demand prospects for OLED in end markets such as TVs, smartphones, and IT, as well as the competitive landscape in the industry.

Regarding LG Innotek, investors focus on potential risks from rising memory costs, since the company is highly exposed in the smartphone camera module space. Progress in ABF and other substrate businesses is also a market focus.

Risk Warning and DisclaimerThe market involves risks, and investment must be performed cautiously. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investments based on this text are at your own risk. ```