AI Memory Market Far From Peak! Goldman Sachs Backs Samsung, SK Hynix, Analyzes '8 Key Focus Areas'

Recently, South Korea's memory giants Samsung Electronics (005930KS) and SK Hynix (000660KS) have seen significant stock price corrections, raising market concerns about whether the AI memory boom has peaked. However, Goldman Sachs' latest research report argues that the market has overly pessimistic interpretations of HBM (High Bandwidth Memory) pricing, long-term supply agreements (LTA), inventory levels, Chinese competition, and shareholder returns—leading to valuations that have clearly deviated from fundamentals. The firm maintains its 'Buy' rating.

Goldman notes that over the past month, Samsung Electronics and SK Hynix shares have declined by approximately 23% and 35%, respectively, bringing their 2027 estimated P/E ratios down to around 3.5 to 3.6 times, with price-to-book ratios at about 1.4 to 1.6 times. This reflects high market skepticism about future earnings sustainability, but does not align with actual supply-demand dynamics.

HBM Prices Expected to Rise Further, Average Price Could Double by 2027

Goldman remains most bullish on the HBM market outlook. The report forecasts that by 2027, Samsung and SK Hynix's average HBM selling prices will increase by approximately 87% and 100% year-on-year, respectively, reaching nearly $2.90 per Gb—significantly higher than general market expectations.

Goldman believes that AI server demand continues to grow rapidly, but next-generation HBM, with more advanced processes and increased stacking layers, faces greater yield challenges. Additionally, HBM production consumes more DRAM wafers, making supply expansion difficult to match demand. The firm estimates that the supply-demand gap in 2027 will be even tighter than this year.

Moreover, general DRAM prices, which are negotiated monthly or quarterly, have already reflected current market conditions and are currently higher than HBM prices, which are mostly based on annual contracts.

Goldman expects that as general DRAM prices rise, HBM will re-establish its price premium and gradually return to profitability levels commensurate with its high added value.

Driven by this trend, Goldman estimates that HBM's share of both companies' DRAM revenue will continue to rise—Samsung from about 8% this year to 16% by 2027, and SK Hynix from 14% to 22%, with further increases expected by 2028.

Long-Term Agreements Shift in Favor of Suppliers, Prepayment Model Emerges as Key Feature

Beyond pricing, Goldman highlights that AI-driven sustained supply tightness has prompted major customers to actively sign long-term supply agreements (LTAs) with memory manufacturers. The latest contracts are generally more favorable to suppliers.

The report identifies four major trends in current LTAs: extended contract durations, increased capacity coverage, more protective pricing mechanisms, and the addition of binding conditions such as prepayments.

Most contracts have been extended from short-term agreements to around five years, with some at three years. Samsung notes its LTAs follow a rolling renewal model, potentially extending actual cooperation beyond five years.

In terms of coverage, several players have raised their LTA capacity coverage to 60–70%. On pricing, mechanisms such as price floors or minimum price guarantees are increasingly adopted to reduce exposure to market volatility.

Goldman believes the most significant change in this round of LTAs is that major customers are now willing to pay substantial prepayments. Samsung, Micron Technology (MU-US), and SanDisk (SNDKV-US) have already secured large deposits or prepayments, enhancing future order visibility and further strengthening suppliers' pricing power.

Module Maker Inventory Buildup Doesn't Signal Industry-Wide Weakness

Regarding recent market concerns about rising inventory at module makers, Goldman states that the module market represents only a tiny fraction of the overall memory market. Even if weak consumer electronics demand leads to inventory buildup, it is unlikely to alter the overall supply-demand landscape.

In contrast, the inventory levels at original manufacturers and end customers are more critical. Goldman estimates that as of the end of Q2 2026, Samsung and SK Hynix's DRAM and NAND inventories remain at 2–4 weeks, below the normal 4–5 week level and far below the over 10-week high levels seen before previous market reversals.

Goldman believes supply growth will remain below demand over the next one to one-and-a-half years, so low inventory levels are likely to persist. Especially since AI server customers typically deploy purchases directly into production, end-user inventory remains healthy.

NAND Supply-Demand Remains Tight, Enterprise SSD Demand Continues to Support

Recent declines in NAND spot prices have also raised concerns about oversupply. However, Goldman believes the NAND supply-demand gap in 2027 will widen further compared to this year.

The report notes that major manufacturers have focused recent capital expenditures on DRAM, with limited new NAND capacity—most investments going toward process upgrades—so supply growth will continue to lag behind demand.

On the demand side, enterprise SSDs remain the biggest growth driver. Goldman forecasts that enterprise SSD demand will continue to grow rapidly from 2026 to 2028, sufficient to offset weakness in the consumer market.

Regarding recent spot price weakness, Goldman points out that the decline is concentrated in the specific TLC 512Gb product, while other specifications like TLC 1Tb remain stable.

Notably, TLC 512Gb prices surged nearly 600% over the past year—significantly outpacing the over 400% gains seen in most other products. The current pullback is essentially a normal correction after a period of extreme outperformance.

Shareholder Returns Have Room to Expand, Buybacks Could Be a Catalyst

Although Samsung and SK Hynix did not announce new shareholder return plans in their recent earnings calls—disappointing some investors—Goldman believes the likelihood of increased shareholder returns in the future is quite high.

Samsung's current three-year shareholder return policy expires this year, and Goldman expects future dividends per share to exceed market expectations. SK Hynix is also likely to increase its payout.

Additionally, Goldman notes that if share prices remain depressed, announcing share buybacks could become a significant market positive, especially for SK Hynix. After completing its U.S. ADR listing, buying back and canceling shares could also help reduce the dilution caused by ADR issuance.

ADR Listing Helps Improve Valuation, Discount Expected to Narrow Gradually

Following SK Hynix's completion of its U.S. ADR listing in July, the ADR currently trades at a premium of about 30% over its Korean-listed shares.

Goldman analyzes that the main reasons are the limited ADR float—only about 2.4% of total shares—and procedural restrictions on two-way conversion, leading to different investor bases in the two markets.

Although the ADR premium is unlikely to disappear in the short term, Goldman believes that as global institutional investors gain easier access to SK Hynix, it will gradually narrow the company's historical valuation discount compared to international peers.

In the long run, the ADR listing provides a direct participation channel for global institutional investors, helping SK Hynix gradually close the historical valuation gap with international peers.

Q2 Performance Below Expectations, Goldman Expects Q3 Rebound

Regarding SK Hynix's Q2 earnings, which slightly missed market expectations, Goldman views this as primarily due to one-off factors.

The report notes that Q2 DRAM average selling price growth was lower than expected, mainly because general DRAM still reflects previously signed contract prices, and the transition to HBM4 products was slower than anticipated.

Looking ahead to Q3, Goldman forecasts that with HBM4 entering volume production and next-generation DRAM process expansion, both DRAM shipment volume and average selling prices will rise simultaneously, leading to a clear recovery in operating profit.

Moreover, since SK Hynix retains more pricing flexibility on general DRAM than its peers, if market prices continue to rise, its profitability could outperform market expectations.

CXMT's Expansion Limited, Minimal Impact on Global Market

The market is also watching whether China's memory giant CXMT (ChangXin Memory Technologies) will alter the global supply-demand landscape after its IPO.

Goldman believes CXMT's future expansion will primarily focus on meeting domestic Chinese demand, with limited impact on the global market.

The report notes that CXMT's leading process technology still lags Samsung and SK Hynix by one to two generations, and its products are mainly LPDDR4(X).

In contrast, Samsung and SK Hynix already have LPDDR5(X) product shares of 75–85%, with a clear product positioning gap. Therefore, CXMT is unlikely to disrupt the global high-end memory market competition structure in the short term.