CITIC Securities: AI Era Cycle + Growth + Domestic Resonance, Bullish on Storage Investment Opportunities

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CITIC Securities Research | Xu Tao, Hu Yeqianwen, Xia Yanlei, Wang Ziyuan, Cheng Ziying

Driven by AI demand, we believe storage remains in the early to mid-stage of a super cycle, with supply shortages expected to continue until at least 2027. Since February, the industry has been validated by Kioxia’s better-than-expected earnings and guidance, NAND contract prices rising in Q1, and leading domestic module manufacturers releasing earnings reports that exceeded expectations, maintaining high industry prosperity. We remain optimistic about storage demand exceeding expectations, with supply and demand expected to stay tight until the end of 2027. Core recommendations: 1) Storage module companies: strong short-term earnings growth potential; 2) Storage design companies: continue to recommend original storage manufacturers and design firms close to OEMs.

▍In the AI era, core upgrades include increased memory bandwidth and capacity; integrated storage and computing is the trend. Near-memory computing is highly prosperous, presenting investment opportunities. Focusing on domestic HBM and CUBE-related industry chains, we highlight four key directions:

1. Storage solution providers: CUBE is essential, with customized design solutions aiding industrialization and entering high-end markets. Focus on leading companies supported by storage OEMs with first-mover advantages. Also, pay attention to manufacturers developing ultra-thin stacked LPDDR solutions.

2. Semiconductor equipment: Supporting industry needs, benefiting from upgrades in advanced packaging and testing, process optimization, and yield improvements, accelerating domestic supply chain localization. Key areas include etching, bonding, and thinning equipment benefiting from advanced packaging upgrades and localization.

3. Advanced packaging: A critical breakthrough point for high-end storage. Equipment availability is high, with mainland Chinese manufacturers leading in advanced packaging capabilities and expanding capacity. Hybrid bonding is central to CUBE 2.0; additionally, HBM industry chain advanced packaging firms support CoWoS solutions.

4. Logic chip companies: Near-memory computing clients, enhancing their competitiveness and accelerating industrialization. Some design firms are actively developing 3D structured logic chips, mainly focusing on edge SoC/NPU, with cloud inference cards gradually being deployed. Near-memory computing is expected to help logic chip companies improve product performance, gain competitive advantages, and benefit from AI incremental demand. It is recommended to focus on leading design firms with strategic layouts.

▍Risk factors:

Risks of global macroeconomic downturn; weaker-than-expected downstream demand; innovation shortfalls; changes in international industry environment and escalating trade frictions; slower-than-expected progress in computing power upgrades; cloud service providers’ capital expenditure shortfalls; anticipated domestic computing chip shipments; slower-than-expected R&D progress in domestic semiconductor equipment; intensified industry competition; exchange rate fluctuations, etc.

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Editor: Ling Chen