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Micron, Samsung, SK Hynix still have valuation advantages?

　　The world's three major memory chip giants (Samsung Electronics, SK Hynix, Micron Technology) all have market values exceeding one trillion dollars. The combined market value of these three companies is about 22% higher than the total market value of the top three oil companies globally.

　　Market capitalization of upstream and downstream companies in the storage industry chain has also surged significantly. Flash memory manufacturer SanDisk's market value has nearly doubled since March this year.

　　The Wall Street Journal recently reported that, amid a market rally, the storage sector appears to have reached a correction point, as this industry has always been highly cyclical. However, the current shift in business models greatly enhances the certainty of future profits for companies. Considering future profitability levels, even the large storage companies with market values over a trillion dollars are still undervalued.

　　The report states that storage chips and oil are both commodities with highly volatile prices. The massive demand driven by artificial intelligence has long exceeded the supply capacity of existing manufacturers, pushing chip prices to record highs. Leveraging this market advantage, storage companies are beginning to push clients to sign long-term supply agreements.

　　Large-scale long-term contracts will reshape industry business models and stabilize price fluctuations. Progress in this area has already become evident: Micron announced its first five-year supply agreement in its March earnings report, and at last week's investment conference, it stated that similar long-term collaborations with other clients have also made substantial progress.

　　SanDisk disclosed last month that five clients have signed long-term agreements with it, covering more than one-third of the company's capacity for the next fiscal year.

　　SK Hynix has not disclosed the exact number of signed clients, but the company explicitly stated during its latest earnings call that future market demand over the next three years far exceeds its own capacity, indicating deep engagement with clients on long-term supply needs. SK Hynix CFO Kim Woo-hyun mentioned during the call: "The strategic importance of storage chips is becoming increasingly critical, and clients now view chip prices and supply stability as core operational risks."

　　Major AI giants have strong financial resources, and a significant portion of future storage capacity will be locked in through multi-year contracts, making price terms more stable. UBS analyst Tim Arcuri estimates that next year, long-term contracts will cover 30% of global dynamic random-access memory (DRAM) shipments. Large cloud service providers like Microsoft, Google, and Amazon have already secured about two-thirds of the world's server-specific DRAM capacity. These long-term contracts make the future profitability of storage companies highly predictable and potentially very substantial.

　　Micron's current market value is slightly over $1 trillion, with an expected forward P/E ratio of less than 10 for the next four quarters, placing it in the bottom 10% among S&P 500 index components; SanDisk's expected P/E ratio is about 10.5, also at a low level. According to FactSet, the valuation of two Korean chip companies is even lower, with Samsung Electronics and SK Hynix expected P/E ratios of only 6 to 7 times. In contrast, the average expected P/E ratio of the Philadelphia Semiconductor Index components is about 26 times. $MU