Q2 storage price increase "far exceeds expectations," Nomura: "Long-term storage bull market" far surpasses "short-term oil price rise"

As the market keeps a close watch on the situation in the Middle East, Nomura said that a “storage supercycle” will go far beyond “oil prices rising in the short term.”

According to the Chase Wind Trading Desk, on March 23, Nomura Securities released a global markets research report stating that the duration of the bull market cycle in the storage industry will last much longer and be more sustainable than the oil-price increases triggered by geopolitical factors, with the key variables being the continued expansion of AI demand and the lag of supply expansion.

Nomura expects the storage price increase in the second quarter of 2026 to be “significantly higher than previously expected,” with the quarter-over-quarter price gains for commodity DRAM and NAND reaching 51% and 50%, respectively. This figure represents a “scale-jumping” surge compared with its prior forecast of 6% and 20%.

Based on the strong expectations for the price trend, Nomura raised SK hynix’s target price by 24% from 1.56 million won to 1.93 million won and reiterated a “Buy” rating. Nomura believes that the recent pullback in share prices caused by the Middle East situation offers investors an excellent opportunity to buy the dip.

AI demand reshapes industry logic

In its report, Nomura analyzed in depth why the storage cycle can “survive” macroeconomic volatility. One major logic is that AI capital expenditures are driving a “long-term bull market” in storage.

Nomura believes that, driven by the AI boom, investment cycles at large technology companies will become the dominant force in the AI industry. This strong demand growth, fueled by AI capital expenditures from tech giants, makes their cycle “longer and more sustainable than the short-term oil-price increase cycle.” By comparison, the share of demand related to consumer devices sensitive to the macro environment (PCs and smartphones) has fallen sharply, from 60% 10 years ago to less than 30% today. This provides a solid foundation for long-term stability in the storage industry.

Nomura describes AI development trends as a “black hole” for storage demand. As AI demand shifts from simple text-chatbots to enterprise-grade agents, and from text-driven to multimodal, memory demand is being broken down into finer segments—moving from being centered on HBM/LPDDR to DDR for RAG, and to next-generation SSDs for even larger-scale context processing.

Business model “long-term contract” strengthens stability

Nomura believes another highlight in the storage industry is that a business-model transformation is underway. To cope with ongoing supply shortages, storage suppliers and customers are actively shifting toward long-term agreements (LTA).

Nomura wrote in the report: “Because supply shortages may persist for a long time, we believe storage manufacturers are seeking sustainable long-term agreements (LTA), rather than simply raising prices. Customers are also proactively requesting to sign LTAs with suppliers to meet continuously growing AI memory demand.”

It is understood that these agreements include terms such as advance payments (as deposits), capacity guarantees, and pricing arrangements. Nomura believes that, although it is uncertain whether LTAs can perfectly withstand the cycle, the storage industry is shifting from “spot-market-driven” to “long-term planning-driven,” which will significantly improve the stability of profitability.

Slow growth on the supply side: the gap may continue through 2028

On the supply side, Nomura’s conclusion is relatively pessimistic. The report emphasizes that, despite demand surging, supply growth will remain insufficient through at least the beginning of 2028.

Nomura stresses that storage—especially HBM, which handles complex inference and training—is still a key bottleneck for AI. The report states: “Increasing memory supply to keep up with the high demand growth still requires physical time… at least before the beginning of 2028, supply growth will not be enough to catch up with the growth in high storage demand.”

Even though giants such as SK hynix have strong cash flows, constraints from expansion cycles and technological bottlenecks mean that production capacity cannot expand significantly in the short term.

Nomura predicts that SK hynix’s operating profits in 2026 and 2027 will be raised by 36% and 37%, respectively, reaching 256 trillion won and 365 trillion won. For cash returns that investors care about, Nomura expects SK hynix’s free cash flow (FCF) yield for fiscal year 2026 to reach 19%, offering significant valuation attractiveness.