Q2 storage price increases "far exceeded expectations," Nomura: "Long-term storage bull market" greatly surpasses "short-term oil price increases"

As the market closely monitors the Middle East situation, Nomura states that “long-term storage bull market” will far surpass “short-term oil price increases.”

According to Wind Trading Platform, on March 23, Nomura Securities released a global market research report indicating that the bull cycle in the storage industry will last much longer and be more sustainable than the oil price surge caused by geopolitical tensions. The key variable is the continued expansion of AI demand and the lagging supply growth.

Nomura expects storage prices to increase “significantly beyond previous expectations” in Q2 2026, with commodity DRAM and NAND prices rising by 51% and 50% month-over-month, respectively. This marks a “quantitative leap” compared to their earlier forecasts of 6% and 20%.

Based on the strong price trend outlook, Nomura has raised the target price for SK Hynix from 1.56 million KRW by 24% to 1.93 million KRW and reaffirmed a “Buy” rating. Nomura believes that the recent stock price correction caused by the Middle East situation presents an excellent opportunity for investors to buy on dips.

AI Demand Reshapes Industry Logic

In the report, Nomura analyzes why the storage cycle can “transcend” macroeconomic fluctuations. A major reason is AI capital expenditure driving a “long-term bull market” in storage.

Nomura believes that under the influence of the AI boom, investment cycles of large tech companies will become the dominant force in the AI industry. The strong demand growth driven by AI capital expenditure from tech giants makes this cycle “longer and more sustainable than short-term oil price increases.” In contrast, demand related to macro-sensitive consumer devices (PCs and smartphones) has significantly declined from 60% a decade ago to less than 30% today. This provides a solid foundation for the long-term stability of the storage industry.

Nomura describes the AI development trend as a “black hole” for storage demand. As AI needs shift from simple text chatbots to enterprise-level agents, from text-driven to multimodal, memory requirements are becoming more segmented, shifting from HBM/LPDDR-centric to DDR used for RAG, and next-generation SSDs for larger context processing.

Business Model “Long-term Contracts” Enhance Stability

Nomura believes another bright spot in the storage industry is the ongoing transformation of business models. To cope with persistent supply shortages, storage suppliers and customers are actively moving toward long-term agreements (LTA).

The report states: “Since supply shortages may persist long-term, we believe storage manufacturers are seeking sustainable long-term agreements (LTA) rather than simple price hikes. Customers are also proactively requesting LTAs to meet the growing AI memory demand.”

These agreements typically include prepayments (as deposits), capacity guarantees, and pricing schemes. Nomura thinks that while LTAs may not perfectly withstand cycles, the storage industry is shifting from “spot-driven” to “long-term planning-driven,” which will significantly improve profit stability.

Slow Supply Growth: Gap May Persist Until 2028

On the supply side, Nomura’s outlook is relatively pessimistic. The report emphasizes that despite surging demand, supply growth will remain insufficient until at least early 2028.

Nomura highlights that storage (especially HBM used for complex reasoning and training) remains a key bottleneck for AI. The report states: “Increasing memory supply to keep up with high demand still requires physical time… Until early 2028, supply growth will be insufficient to meet the high storage demand.”

Even with strong cash flow from giants like SK Hynix, capacity expansion is limited by cycle and technical bottlenecks in the short term.

Nomura forecasts SK Hynix’s operating profit for 2026 and 2027 to be raised by 36% and 37%, reaching 256 trillion KRW and 365 trillion KRW respectively. Regarding cash returns, Nomura expects SK Hynix’s free cash flow (FCF) yield for fiscal year 2026 to reach 19%, offering significant valuation appeal.

The above highlights are from Wind Trading Platform.

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