Morgan Stanley: 'Selloff of US memory stocks creates a compelling entry point'. - $Micron Tech(MU.US) $Sandisk(SNDK.US) $Seagate Tech(STX.US) $SK Hynix(SKHY.US) $Western Digital(WDC.US) $NVIDIA(NVDA.US) $Broadcom(AVGO.US)
"This remains an unusual memory cycle, as data center strength is the only cause – which means that as we saw in April there are mixed signals elsewhere that may be a false flag. Memory isn't the best risk reward in our coverage – which we think is NVDA/AVGO – but it's catching up fast. Memory stocks are crowded, and with the unusual nature of this cycle periods of drawdowns seem inevitable – but we are buyers on that weakness. In a cycle entirely driven by data center, there are going to be mixed signals in consumer, PC, smartphone markets, which impact spot market and inventory levels at various points; we believe that some of the anecdotes dragging the stocks down in recent days have been about those parts of the market. But we spent last week talking to several of our purchasing contacts in the data center space, and the intensity of the shortages in that part of the business show no signs of abating. We see prices up at least 25% on a like-for-like basis from 2q to 3q, above our estimates and above 3rd-party estimates. As importantly, the longerterm concerns that the memory shortage will intensify in 2027 and again in 2028 are still as strong as ever. There isn't enough memory vs. AI requirements, and we just don't see that changing...we think that the selloff in the stocks has created a strong entry point. We think that the best value in the market comes from the compute names, notably NVDA and AVGO, but memory is catching up quickly given this deceleration, and we think this should provide a good entry point for the stocks."The copyright of this article belongs to the original author/organization.
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