What does SK Hynix’s “sold out” status mean? Morgan Stanley: Approaching the 2017-2018 “memory super cycle”, raises DRAM price forecasts

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The wave of artificial intelligence is reshaping the global semiconductor supply chain at an unexpectedly rapid pace. The latest signals from memory chip giant SK Hynix suggest that the market may be entering a new cycle defined by supply shortages and soaring prices.

As previously reported by Wallstreetcn, SK Hynix's third-quarter performance hit a record high, with operating profit surging 62%, driven by the complete "sell-out" of its HBM high-bandwidth memory. The company has locked in all DRAM and NAND customer demand through 2026, and HBM4 is set to ship by the end of 2025.

According to news from Zhui Feng Trading Desk, Morgan Stanley analysts Shawn Kim and Duan Liu pointed out in a report on the 29th that SK Hynix’s “sell-out” signal indicates an even tighter supply ahead, with a price increase environment likely to continue through 2026. The analysts raised their 2026 DRAM price expectations from a previous year-on-year increase of 26% to 30%, bringing SK Hynix's outlook closer to the super cycle benchmarks of 2017-2018.

This adjustment led Morgan Stanley to raise its earnings-per-share forecasts for SK Hynix by 5%, 14%, and 15% for 2025, 2026, and 2027, respectively. Based on a residual income model, the analysts increased their target price from 570,000 KRW to 630,000 KRW, which equates to 2.6 times the expected 2026 price-to-book ratio, about 15% upside from current levels. Morgan Stanley maintains its “Overweight” rating and its “Attractive” view on the industry.

Imbalanced Supply and Demand Intensifies, DRAM Inventory Critically Low

The full-blown explosion of AI applications is the core driver behind this surge in memory market demand. According to the Morgan Stanley report, demand for AI inference computation is greatly boosting the general memory chip market, quickly depleting industry inventory and fueling continued price momentum.

Comments from SK Hynix management confirm the tightness of supply. Reportedly, DDR5 memory chip inventory has dropped to an extremely low level of about two weeks, almost “shipping out as soon as it is produced.” At the same time, NAND flash inventory has returned to the normalized level of 4-5 weeks. This situation directly reflects strong market demand, especially with soaring eSSD demand from hyperscale data center servers and AI-generated content storage.

Based on this, Morgan Stanley predicts that industry-wide DRAM contract prices will achieve a high-teen-digit quarter-on-quarter increase in Q4 2025, while NAND prices will rise quarter-on-quarter by 10-15%.

Analysts emphasized in the report that the market seems ready to continue rewarding SK Hynix—expanding an AI business (HBM) that essentially accounts for 20% of revenue to 100% of revenue (DRAM, NAND). This expansion is sustainable and comes with substantial pricing power.

HBM Leadership Firm, CapEx to Surge

Morgan Stanley estimates that SK Hynix's capital expenditure in 2026 is expected to significantly surpass previous levels, rising about 30% from around 27 trillion KRW in 2025 to 35 trillion KRW. The wafer fabrication equipment (WFE) and infrastructure ratio is expected to rise from 55% in 2025 to 60% in 2026, mainly to support the capacity ramp-up at the M15X plant. DRAM still accounts for about 90% of WFE spending.

The M15X plant started ahead of schedule, with equipment installation already underway; it will be used for HBM production in 2026. DRAM and NAND expansion will be driven by technology transitions, including migrating to 1c DDR5 and 321-layer QLC (from 238-layer TLC). Morgan Stanley estimates total capital expenditures in 2026 will increase by about 42% to 35 trillion KRW.

The report also notes that the surge in AI inference computation demand is driving up demand for commodity memory, drawing down inventory and sustaining price momentum. As expected, strong quarterly performance is being dominated by AI demand, including commodity memory demand driven by inference calculation. SK Hynix's leadership in HBM and the step-change in all general memory demand gives it higher memory pricing opportunities.

Morgan Stanley concludes in the report that the recent unexpected surge in commodity DRAM and NAND demand lays the groundwork for a severe supply shortage in 2026, and stronger market conditions may persist through 2026.

Morgan Stanley Raises Forecasts, Reiterates "Overweight" Rating

The Morgan Stanley team raised its key financial forecasts. The firm increased its outlook for the annual growth rate of DRAM blended average selling price in 2026 from the previous +20% to +30%, noting that this level rivals the previous super cycle.

This adjustment directly boosted earnings expectations for SK Hynix. Morgan Stanley raised the company’s estimated earnings per share (EPS) for fiscal 2025, 2026, and 2027 by 5%, 14%, and 15%, respectively.

Under the new valuation model, Morgan Stanley raised SK Hynix’s target price to 630,000 KRW, corresponding to a 2.6x 2026 P/B ratio, and maintains its “Overweight” rating. The firm believes that, given SK Hynix’s leadership in HBM and the sharp rebound in general memory prices, the stock price still has room to rise.

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The above highlights come from Zhui Feng Trading Desk.

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