Morgan Stanley: Storage share pullback of 15% to 25%; the market is shifting from pricing upside to earnings sustainability

Deep Tide TechFlow message, according to Chao-direction research, Morgan Stanley’s July 14 TMT network livestream said that over the past month, Asian storage stocks have retreated 15% to 25%, and the chip sector as a whole has been moving sideways. The fundamentals have not reversed; it’s the valuation framework that is changing.

Three key variables determine the direction: CSP’s capital expenditure expectations are 30% to 37% higher than consensus, and the late-July earnings season is the first validation window; LTA is weakening fears of a cyclical downturn—after more than half of contracts are locked in, the price floor is being raised; Yangtze Memory’s Fab4 and Fab5 each have plans for about 100 kwpm of capacity. If capital expenditure discipline is maintained, NAND supply-and-demand tightness could continue through 2028; if capacity expansion accelerates, it will become the biggest oversupply risk.

Morgan Stanley judges that the pricing logic for storage stocks is shifting from cyclically high volatility to structurally mid-to-high returns. Companies that can prove they have the ability to sustain profitability will receive a valuation premium.