The memory upcycle is "far from over"! Morgan Stanley: Investors should hold memory stocks rather than "timing" them, and beware of consumer electronics and PCs with "sharp cost increases."

The memory upcycle is "far from over"! Morgan Stanley: Investors should hold memory stocks rather than "timing" them, and beware of consumer electronics and PCs with "sharp cost increases."

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Author: Dong Jing

Source: Hard AI

Morgan Stanley states that the current super cycle in the memory industry is structural, with its strength and duration set to surpass historical norms. The correct strategy is to embrace leading memory companies with pricing power, while recognizing the severe challenges facing downstream consumer electronics.

On November 12, according to Hard AI, Morgan Stanley sent a clear signal in its latest research report: The AI-driven memory super cycle not only truly exists, but its strength and duration may far exceed market expectations.

The report states that the core driving force behind this round of memory demand has shifted from traditional price-sensitive customers to AI data centers and cloud service providers, who are less sensitive to price. AI inference workloads are becoming the main engine for the explosive, exponential growth in general memory demand.

Channel quotations are showing unprecedented strength. In the past two weeks alone, server DRAM quotes for Q4 2025 have soared nearly 70%, and NAND contract prices have also risen by 20-30%.

Morgan Stanley notes that history shows memory up-cycles typically last 4–6 quarters. Trying to "time" tops and bottoms often leads to missing most of the returns. In the current fundamentals-driven bull market, "holding" is the best strategy for excess returns.

The research report is optimistic about memory makers, believing SK Hynix, Samsung, and others will see profitability surge, thanks to strong pricing power. In contrast, downstream PC, mobile, and consumer electronics supply chains will face severe cost pressure and profit squeeze, warranting caution.

AI Reshapes Demand Structure: This Cycle is Different

Morgan Stanley says we are witnessing an unprecedented market structure.

Unlike past cycles driven by PCs and smartphones, the core of memory demand this time is an "arms race" centered on AI data centers and cloud service providers. These customers are far less sensitive to price than traditional consumers, caring more about securing enough infrastructure to support large language models (LLMs) and AI application development.

The report emphasizes that inference workloads have become the main driver of general memory demand and show a "legitimate exponential growth trend."

Morgan Stanley says that even if spending on large language models consolidates in the future, the persistent demand generated by AI applications will continue to support strength in the general memory market.

Additionally, while market enthusiasm for HBM has cooled, its manufacturing process continues to structurally squeeze out traditional memory chip capacity, worsening supply shortages.

Morgan Stanley stresses that all this means we cannot view the current cycle through a historical lens. This is a whole new situation, fundamentally changed by a technological revolution.

Unprecedented Pricing: Channel Prices "Out of Control" Across the Board

Channel survey results are enough to shock skeptics. In just the last two weeks, the outlook for memory pricing has dramatically strengthened:

DRAM Prices Surge: Server DRAM contract quotes for Q4 2025 have seen a staggering near-70% increase, far exceeding Morgan Stanley’s previous forecast of 30%. Worried about future price rises and supply shortages, clients seemingly have no choice but to accept. DDR4 pricing has also climbed 50% due to strong demand from US data center network switches.Spot Market Explosion: DDR5 (16Gb) spot prices have soared from $7.50 in September to $20.90, a rise of 336%. For secondary clients, distributors, and module makers, DRAM and NAND have reached extreme levels of scarcity.

Widespread NAND Shortages: NAND, a key component of AI computing and video storage, is also in short supply. It's expected that 3D NAND chips (TLC & QLC) will see a quarter-over-quarter price increase of 65-70% in Q4. Samsung’s shift to 321-layer V8-NAND will limit its output in H1 2025, leading to only a 10% annual shipment increase.No Alternatives Available: At the same time, HDD (mechanical hard drive) order visibility has extended to 2027—delivery periods over two years—but major manufacturers have not actively expanded capacity. This supply-demand imbalance has caused some demand to spill over to eSSD, further showing the huge supply gap in the storage market, with customers left with no alternative.

Abandon Timing Fantasies: Investors Should "Hold" Not "Trade"

The report says that in a volatile market, human "negativity bias" often leads us to fear when stock prices hit record highs, expecting a reversal.

Morgan Stanley makes it clear: this is a misconception. Memory stocks are hitting new highs because of AI, but that does not mean the rally is ending. The report gives clear investment advice:

Time spent in the market is far more important than trying to time the market. The memory cycle is inherently volatile, full of rebounds and pullbacks. Investors need to tolerate this discomfort and maintain positions, because no one can consistently and accurately predict the market.

As quoted in the report: “Non-action is often the best strategy.”

Morgan Stanley says that ultimately it is profits that determine stock prices, not valuation or some historical timing. As long as skepticism remains in the market, it fuels further upside in prices.

Winners and Losers: Favor Memory Makers, Beware Downstream Cost Squeeze

In this cost tsunami triggered by memory, the line between winners and losers will be sharply drawn.

Winners: Memory manufacturers. Companies with pricing power, such as SK Hynix and Samsung, will directly benefit from higher prices, achieving a dramatic increase in profits. Morgan Stanley emphasizes that since the start of the year, upward revisions in earnings expectations have been a main driver of stock price increases.

Losers: Memory-consuming sectors. The supply chains for PCs, non-high-end smartphones, and a wide range of consumer electronics will face severe profit squeezes.

These companies will find it hard to fully pass on sharply rising memory costs to consumers, which may ultimately lead to demand destruction and a decrease in shipments in 2026 and 2027.

Therefore, Morgan Stanley recommends caution towards these sectors—especially the PC industry. The report mentions that Morgan Stanley has recently downgraded ratings for several key companies in this field.

This article is from the WeChat public account "Hard AI". For more AI news, visit here.

Risk Warning and DisclaimerThe market is risky, and investment requires caution. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investments made based on this are at your own risk. ```