"The Cycle" is Gone? Price Increases May Become the New Normal Storage Multiple Tailwinds Taking Effect(Attached Stocks)

On Monday, storage concepts experienced a major surge, with 20 Chinese stocks including Golden Sun, Langke Technology, and Yachuang Electronics hitting the daily limit; DeMingli and Zhaoyi Innovation also hit the limit.

Does the storage cycle logic no longer exist?

According to Cailian Press, huge investments in artificial intelligence (AI) have brought about revolutionary changes in the storage industry, making the “cycle logic” completely disappear.

For decades, storage chip stocks have been trapped in a cycle of boom, bust, and repeat. However, industry executives now say that AI has structurally broken the old cycle, with no signs of prices falling.

Antonio Neri, CEO of Hewlett Packard Enterprise (HPE), stated, “We will continue to raise prices because the entire industry will keep raising prices, as supply is insufficient to meet demand.”

An executive from Seagate Technology, a hard drive manufacturer, also said that rising memory prices are likely to become the “new normal” in the coming years.

One of Korea’s largest storage chip manufacturers, SK Hynix, told the media that the entire storage industry is undergoing a structural transformation.

A company spokesperson said in a statement, “Our customers, including large-scale data center operators, are increasingly inclined to sign long-term contracts rather than the more common one-year contracts in the past.”

Micron Technology also stated that customers are now very willing to sign long-term supply agreements to lock in memory supplies for the coming years; Broadcom CEO Hock Tan said during last week’s earnings call that customers have locked in supplies through 2028.

Current AI workloads require architectures that are completely different from those supported in the past and demand much higher storage capacity. Meta announced a new self-developed AI chip on Wednesday and also expressed concerns about the supply of high-bandwidth memory (HBM).

In summary, due to the large-scale data centers squeezing consumer supplies and substantial relief not expected until 2027, AI development may have ushered in a new era for memory.

Leverage Funds: Buying up these storage stocks since February

Data from Oriental Wealth Choice shows that since February this year, leveraged funds have been aggressively buying a batch of storage concept stocks. Specifically, Baiwei Storage ranks first with a net financing purchase of nearly 1.6 billion yuan; DeMingli ranks second with nearly 1 billion yuan.

Other stocks such as Jiangbolong, Zhaoyi Innovation, Jingsheng Electromechanical, Beijing Junzheng, Guoxin Technology, Kexiang Co., GigaDevice, China Resources Micro, Shannon Chip Innovation, and others have net financing amounts ranging from 570 million to 190 million yuan.

Institutional Research Reports: Supply and demand sides are both favorable

Southwest Securities research indicates that storage may enter a super cycle. 1) AI large model technology is iterating beyond expectations, with explosive growth in global token consumption, leading to massive data storage, processing, and retrieval demands, ushering in a super boom in the storage industry. 2) Overseas major manufacturers are shifting limited capacity toward high-margin HBM and DDR5 products, severely squeezing capacity for consumer and low-end storage chips, expanding supply-demand gaps. 3) After over-investment in capacity and capital expenditure in the last cycle, manufacturers are now cautious about expansion; high-end HBM chips face long cleanroom construction cycles and low yield issues, with short-term supply remaining tight. With demand exploding and supply being rigid, storage prices are expected to continue rising overall through 2026, according to CFM flash memory market forecasts.

On the demand side: The fundamental reason for this super cycle is the unexpected iteration and upgrade of AI large model technology, creating massive data storage, processing, and retrieval needs. 1) Thanks to rapid development of generative AI, applications like AI agents, multimodal applications, and native video tech are exploding, significantly increasing demand for HBM, DRAM, NAND, and other storage media, initiating a new storage super cycle. 2) According to Open Router, by February 2026, the token consumption of major global large models will be more than ten times that of the same period in 2025, indicating extremely strong computing power and storage needs. 3) It is expected that in 2026, the eight major CSPs will increase capital expenditure by 25% to about $500 billion, continuing high-intensity infrastructure investment.

On the supply side: Capacity is constrained and expansion is cautious, with short-term supply being rigid. 1) Most storage manufacturers operate under an IDM model, with huge capital expenditures. After over-investment in capacity and capex in the last cycle, they are now cautious about expansion. 2) Manufacturers are shifting limited capacity toward high-margin HBM and DDR5 products, severely squeezing low-end storage chip capacity. 3) High-end HBM technology has high barriers and low yields, and current cleanroom construction cycles (8–12 months) cannot keep up with AI/HBM demand surges. 4) Currently, inventory levels at the three major manufacturers are only 3-5 weeks, at historically very low levels, indicating extremely tight supply.

Southwest Securities believes that with the momentum of AI, the domestic storage industry chain is rising rapidly: amid the booming global storage industry, domestic companies are leveraging engineering talent, complete infrastructure, and a full industry chain to grow at an astonishing pace. Represented by Yangtze Memory, Changxin Storage, Zhaoyi Innovation, and Jiangbolong, these local enterprises are expanding capacity, improving yields through independent innovation and process upgrades, and making breakthroughs in AI computing power, consumer electronics, and enterprise markets, shifting China’s storage industry from scale growth to technological leadership.

BOC International Securities’ research suggests that considering both the demand increase from AI and the structural supply shocks, there are highly certain opportunities in the storage industry chain in both the short and medium term. They recommend focusing on the following segments: 1) Distributors and module manufacturers benefiting from cyclical price fluctuations: Shannon Chip Innovation, Jiangbolong, Baiwei Storage, DeMingli, KaiPu Cloud; 2) IC design companies focusing on niche markets and storage-related chips: 【Niche Storage】: Zhaoyi Innovation, Dongxin Co., Puran Co., Jucheng Co., Beijing Junzheng; 【Supporting Chips】: Lankei Technology, Lianyun Technology; 3) Domestic semiconductor storage supply chain: 【Equipment】: North Microelectronics, Microchip, TuoJing Technology, Maiwei Co., Jingzhida, Weidao Nano, Changchuan Technology; 【Materials】: Huahai Chengke, Lianrui New Materials, Shennan Circuit, Xingsen Technology, Guanggang Gases, Yak Technology (chemical group), Xingfu Electronics; 【CBA DRAM】: Jinghe Integration, Huicheng Co.; 【Packaging】: Shen Technology.

(Article source: Oriental Wealth Research Center)