Morgan Stanley warns of a shift in the memory market: bearish on HBM "premium myth," bullish on traditional storage "cycle return"

Morgan Stanley's latest warning indicates that a significant shift in the global memory market is imminent: the "premium myth" of HBM (High Bandwidth Memory) is facing challenges, while traditional storage products are encountering cyclical recovery opportunities.

On August 14th, according to news from the Chasing Wind Trading Desk, Morgan Stanley stated in its latest research report that as competition in the HBM market intensifies and pricing pressures emerge, traditional DRAM and NAND products are expected to see more sustainable growth by 2026.

The bank pointed out that the pricing environment for HBM is changing rapidly, with significant market share shifts and intensified competition expected by 2026, but short-term risks seem to be under control. Positive cloud service capital expenditure data and expectations of tariff relief create conditions for HBM revenues to return to normal and sustainable levels.

Against the backdrop of an improving macro environment, particularly with the U.S. CPI data moderately raising interest rate cut expectations, market funds are shifting from AI-driven memory stocks to economically sensitive traditional memory sectors. Morgan Stanley expects that if the Federal Reserve cuts interest rates and economic growth expectations improve, there will be a preference for traditional commodity memory over HBM, with a particular focus on traditional DRAM.

Intensifying HBM Competition: The "Premium Myth" Faces Challenges

Pricing pressures are emerging. Morgan Stanley's channel research shows that in the pricing negotiations for SK Hynix's HBM3E 12hi contracts with NVIDIA, the price range is still around $440 per cubic (approximately $1.69/Gb), but negotiations are ongoing and have not yet been finalized.

More noteworthy is the pricing dynamics of HBM4. Morgan Stanley's channel research indicates that HBM4 pricing has been set in the range of $590-$600 (approximately $2.3-$2.34/Gb), but Morgan Stanley believes this is unlikely to be a commitment for the entire year. Morgan Stanley emphasizes:

The key is that if Samsung passes the HBM4 qualification certification, pricing will face further discount pressure, and quarterly negotiation models may become the norm.

Market share reshuffling. Morgan Stanley believes that the most important market change is the redistribution of market share, with SK Hynix's share in the NVIDIA market expected to drop from 85-90% in 2025 to over 50% in 2026, primarily due to the increasingly fierce competition from Samsung and Micron.

Morgan Stanley pointed out that Samsung's pace of catching up has exceeded expectations. According to supply chain research, Samsung has sent early samples of HBM4 to major customers and is expected to submit the final product to NVIDIA by the end of August. Its 1c process technology ramp-up is proceeding smoothly, with significant improvements in yield, creating conditions to break SK Hynix's monopoly.

Traditional Storage: The Logic of "Cyclical Return" Becomes Apparent

The DRAM (Dynamic Random Access Memory) market is facing pricing pressures in the short term. In the traditional DRAM market, Morgan Stanley has observed that the increase in contract pricing has narrowed in the third quarter. For mainstream DDR5 products, server customers have accepted a quarter-on-quarter increase of 2-3%, while some PC customers are willing to accept higher pricing to build inventory

The medium-term outlook is positive. Morgan Stanley stated that the increase in contract pricing in the fourth quarter is expected to further slow down, with DDR5 prices for most consumer electronics customers likely remaining stable, while AI demand will support server customer prices to achieve low to mid-single-digit increases. Regarding DDR4, although supplier inventories are relatively lean, the increase will significantly decline compared to the third quarter as customers upgrade specifications and have built some inventory.

Morgan Stanley also noted that some customers resisted manufacturers' requests for a 5-10% price increase on DDR5 contracts in the third quarter, with recent transactions mostly at low to mid-single-digit levels. This indicates that the pricing power in the traditional DRAM market is weakening, but a cyclical bottom may be forming.

The NAND (flash memory) market shows significant differentiation characteristics. In the NAND market, Morgan Stanley stated that contract pricing in the third quarter was finalized with a quarter-on-quarter increase of 3-5%, lower than the previously expected 5-10% increase. PC customers face a 5-10% price increase, while smartphone UFS/eMMC (embedded storage technology) remains basically flat, and eSSD (enterprise solid-state drive) demand increased by 3-5% quarter-on-quarter.

In the fourth quarter, a differentiation between AI and non-AI demand will emerge. Morgan Stanley pointed out that TrendForce expects the overall ASP to decline by 0-5% quarter-on-quarter, mainly due to weak consumer demand for PCs and smartphones. However, strong demand for enterprise SSDs is expected to continue into the first half of 2026, as AI infrastructure expands in inference applications and AI capital expenditures remain strong, with eSSD pricing expected to rise by 0-5% in the fourth quarter.

Morgan Stanley expects enterprise SSD (solid-state drive) pricing to increase by 0-5% in the fourth quarter of 2025. The process of QLC NAND (a type of flash memory) replacing HDD (hard disk drive) may accelerate in the second half of 2026, with Meta leading the adoption of more enterprise SSDs. As HDD delivery times extend to about a year, many server customers are seeking near-line QLC enterprise SSD solutions.

Morgan Stanley stated in the report that, based on pricing prospects, they prefer commodity memory over HBM products, especially traditional DRAM.

It is worth noting that Morgan Stanley emphasized the significant impact of macro factors on memory stocks. Positive U.S. CPI data has raised expectations for Federal Reserve interest rate cuts, and if economic growth expectations improve and interest rates do indeed decline, then the reverse trading logic may begin to emerge, with the market potentially rotating towards severely undervalued traditional commodity memory stocks