The super cycle is just beginning! Morgan Stanley: Traditional storage pricing power will be "further strengthened" in 2026.

While the market’s attention is almost entirely focused on the buzz surrounding AI high-bandwidth memory (HBM), a recent research report from Morgan Stanley provides key insights for investors seeking non-crowded trades.

According to Wind Trading Desk, on December 4, the Morgan Stanley team led by analysts Daniel Yen and Charlie Chan pointed out in a report on Greater China tech semiconductors that the “traditional memory” market is brewing a perfect storm of supply and demand mismatch. For investors still hesitating on whether to lock in profits after the recent rebound, Morgan Stanley’s conclusion is remarkably clear: The cycle has only just begun—getting off now is too early.

This is not the time to take profits

As early as the end of Q2 this year, Morgan Stanley anticipated that shortages in traditional memory would drive a “super cycle.” Now, this prediction is being fulfilled, with contract prices starting to rebound at the end of Q3. Historically, up cycles in traditional memory typically last 3–4 quarters, which means there is still plenty of upward momentum.

The report bluntly points out that market profit forecasts for 2026 may still be too conservative:

“This is not the time to take profits... Consensus profit expectations for 2026 may see very significant growth.”

The “crazy” pricing of DDR4 and NOR

The most striking data in the report comes from the sharp differentiation of the DDR4 market. Driven by enterprise-level demand, initial price negotiations for DDR4 are extremely favorable to suppliers.

Morgan Stanley expects that contract prices in Q1 2026 may surge by more than 100%. The current supply-demand tension is astonishing, especially with severe shortages of 16Gb DDR4 products—channel inventory is almost zero. This shortage is directly causing a dramatic divergence between spot market prices and DRAMeXchange benchmark prices:

“Spot prices are as high as $100, while DRAMeXchange shows spot prices at only $45.5.”

Meanwhile, the effects of production cuts are spreading across Flash products. Due to lower wafer value and rising backend packaging prices, NOR Flash suppliers are reallocating capacity to other products. Morgan Stanley predicts that the NOR supply gap in 2026 will expand from low-to-mid single digits to “high single digits,” pushing prices up by more than 20% in Q1 next year.

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