Morgan Stanley says memory chip selloff is over, reaffirms targets for Samsung Electronics, SK Hynix

Morgan Stanley, which had recently warned of a sharp drop in memory chip stocks, now says the correction is over — calling the recent decline a "small bend" in the cycle rather than a sign of a broader downturn, and flagging current share price levels as an attractive re-entry point.

Morgan Stanley said in an Asia technology equity report titled "Memory — A Small Bend," published Friday, that "the steepest correction seen in the memory industry so far appears to be over" and that "valuations offer an attractive tactical re-entry opportunity."

Earlier, in July, Morgan Stanley had warned of a possible short-term correction, citing signs that memory chip price gains were nearing a peak and that investor positioning in memory stocks had become overly concentrated. In the new report, issued after that correction materialized, the bank characterized the pullback as a temporary mid-cycle dip rather than the start of a sustained industry downturn.

The bank has not entirely set aside its caution on the memory sector, however. The report also noted that from the fourth quarter onward, the pace of memory price increases could slow as inventories and supply grow, leaving less room for further upward earnings revisions. While Morgan Stanley views the recent sharp selloff as largely finished, it still flags a potential deceleration in memory prices and the supply cycle as a lingering risk.

Even so, the bank assessed AI-related capital expenditure and shareholder returns as favorable factors for memory chip stocks. It particularly noted that share buybacks and other shareholder return programs at Samsung Electronics and SK Hynix could serve as key catalysts for future share price gains.

Morgan Stanley kept its price targets unchanged. Its target for SK Hynix stands at 2.6 million won ($1,830), while Samsung Electronics remains at 375,000 won. The bank raised its fiscal year 2026 earnings-per-share estimate for SK Hynix by 13 percent but cut its Samsung Electronics forecast by 10 percent.

The report has drawn attention in part because Morgan Stanley has a track record of issuing strong warnings on the memory sector. Sean Kim, the Morgan Stanley analyst who authored the report, gained recognition in 2021 for a note titled "Memory, Winter is Coming," in which he presciently warned of an impending slowdown in the memory industry.

This time, however, Kim argued that AI capital spending-driven memory demand and shareholder return programs distinguish the current environment from that earlier period, making the recent correction a potential buying opportunity. He also cautioned that with memory price growth expected to slow after the fourth quarter, the pace of earnings improvement going forward may be more gradual than before.