Morgan Stanley: Memory Chip Cycle Slows But AI Demand and LTA Reshape Long-Term Value

TechFlow reports, according to TechFlow Research, Morgan Stanley's latest August research report pointed out that the Q3 DRAM contract price quarter-on-quarter increase fell from an expected 20% to 15%, memory module inventory rose to 12.5 weeks, and signs of weakness emerged in China's consumer electronics demand. However, Morgan Stanley believes this is just a normal cyclical slowdown, not a trend reversal. The capex growth rate of the four major cloud vendors was revised up from 14% to 29%, and AI demand remains strong. Samsung aims to place 60% to 70% of capacity under long-term agreements, SK Hynix has completed LTA negotiations with about 10 customers, and Micron's 16 agreements cover approximately $100 billion in minimum revenue.

Morgan Stanley maintains an overweight rating on Samsung and SK Hynix, with target prices of 381,000 won and 2.6 million won, respectively, implying 74% to 84% upside potential. Samsung's current stock price corresponds to an expected 2026 P/E ratio of about 5 times, and SK Hynix about 5.8 times. Morgan Stanley believes LTA is changing industry earnings visibility, the market has not yet assigned a premium to earnings supported by LTA, if LTAs verify downside protection, the memory valuation system may be reshaped.