When Will the Storage Frenzy Peak? This Is the Most Effective "Leading Indicator"

Since January 2023, driven by AI computing demand, storage chip stocks have continued to soar, with the top three storage manufacturers’ stock prices averaging a 699% increase. However, as stock prices keep climbing, the market’s main concern is no longer “how much more can it rise,” but rather “what signals should we watch for to identify a turning point.”

On March 16, UBS Global Research released a report titled “Global I/O Storage Semiconductors,” reviewing the cyclical patterns of the storage industry over the past 20 years and reassessing current leading indicators. UBS pointed out that, propelled by AI computing, the fundamental logic of the storage industry has undergone a radical change, and traditional valuation and forecasting models may no longer be applicable. Operating profit has become a better leading indicator.

The Industry’s “Underlying Logic” Has Changed: AI Pushes Supply and Demand to a New Equilibrium

UBS attributes this round of market rally to “the era of AI computing, with storage value moving upward.” The report notes that two supply-side constraints are accumulating behind this valuation reassessment:

• HBM (High Bandwidth Memory) is occupying an increasing share of DRAM wafer capacity, leading to a “severe DRAM shortage.”
• This tension is further amplified by the “trade ratio”: that is, HBM DRAM die sizes are continuously increasing relative to DDR, consuming more capacity per unit of HBM.

Based on this, UBS presents a more sensitive conclusion for investors—the shift upward in the return rate center. The report states: “We believe ROE has undergone a structural reset,” and forecasts that Samsung, SK Hynix, and Micron will have an average ROE of 36% from 2026 to 2030E, significantly higher than the 15% over the past decade. This means that relying on old cycle templates to find the top may become more frequently unreliable.

Traditional Indicators Fail: The “Second Derivative” Is No Longer Reliable

In the past, investors often used the “second derivative”—that is, the quarter-over-quarter or year-over-year acceleration of storage contract prices (ASP)—to predict stock price tops. However, UBS’s review shows that the reliability of this indicator is declining.

Among the ten “stock price peaks” over the past 20 years, only 50% coincided with the quarter-over-quarter change in DRAM ASP peaking in the same or nearby quarter.

For example, in Q4 2009 (post-global financial crisis recovery), Q2 2013 (industry consolidation cycle), and Q1 2017 (traditional cycle), the ASP quarter-over-quarter peaks occurred 3, 5, and 5 quarters before the stock price peaked, respectively.

UBS notes that while the actual ASP’s synchronization with stock prices is somewhat better (peaking in the same quarter 60% of the time), overall, the “second derivative” has become difficult to use as an accurate “top signal” in today’s complex market environment.

Finding a New Anchor: Operating Profit as a Better Leading Indicator

Since traditional indicators are failing, what should investors watch? UBS’s answer is: operating profit (OP).

Operating profit not only reflects price changes but also incorporates bit growth and cost reductions per bit. Therefore, it is closer to the industry’s true economic health “final value.”

Analysis shows that over the past 20 years, stock prices have peaked simultaneously with or ahead of operating profit in 90% of cases.

Especially before 2012, stock prices and operating profits peaked almost simultaneously. After that, market expectations became more forward-looking, and stock prices typically peaked one or two quarters before operating profit (most often one quarter ahead).

However, UBS also warns that predicting when operating profit will peak is not easy. The reason remains that the supply-demand shifts brought by AI may make profit cycles harder to forecast, especially as HBM continues to squeeze DRAM capacity, making the relationships among prices, supply, and profits more complex, and the estimated timing of profit peaks may shift rapidly.

Therefore, operating profit can serve as an important observation indicator, but it is not a “panacea.”

AI Reshapes the Industry: ROE Structural Reset, Rally Expected to Continue Until 2027

UBS emphasizes that the current storage cycle is fundamentally different from previous ones. The advent of the AI computing era has caused a profound shift in value toward the storage sector.

As HBM (High Bandwidth Memory) takes up more DRAM wafer capacity, DRAM shortages are becoming more severe. Additionally, the chip sizes of HBM DRAM are increasing, further intensifying capacity constraints.

Based on these factors, UBS believes that the net asset return rate (ROE) of the storage industry has undergone a structural reset. The report predicts that from 2026 to 2030, the average ROE of Samsung, SK Hynix, and Micron will reach 36%, far higher than the 15% of the past decade.

Therefore, the report remains optimistic about the future of storage stocks. It forecasts that operating profits in the storage industry will peak in Q3 2027. Under unchanged conditions, this suggests that the rally in storage stocks could last until Q2 2027.

UBS continues to favor SK Hynix for buying, while maintaining “Buy” ratings on Samsung, Micron (MU), and Nanya Technology.

All the above exciting content is from Chasing Wind Trading Platform.

For more detailed analysis, real-time insights, and frontline research, please join【Chasing Wind Trading Platform ▪ Annual Membership】

![](https://img-cdn.gateio.im/social/moments-91f9672584-e942b3b541-8b7abd-ceda62)

Risk Warning and Disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.