#Gate广场万圣节 #GateSquareHalloween Storage giants’ earnings reports land next week: Has the supercycle peaked, or is this just a pullback before the next leg up?
After a sharp sell-off, the storage sector, seen by the market as a barometer for the AI trade, is about to face its most important test. Next week, three giants—SK hynix, Samsung Electronics, and SanDisk—will report quarterly results in succession. The answers on whether the cycle can keep climbing are likely hidden in these earnings reports.
01 How high are expectations? SK hynix profit up 376%, SanDisk revenue up 362%
First, market expectations. Analyst estimates compiled by S&P put SK hynix’s third-quarter revenue at 99.68 trillion won, up about 307% year over year, with net profit growth potentially topping 376%. SanDisk’s numbers are just as staggering: revenue for its first quarter of fiscal 2027 is expected to be about $10.67 billion, up roughly 362% year over year.
SanDisk is a great case study. In each of the past four fiscal quarters, its earnings per share beat market expectations, while its stock moved an average of ±9.31% on the day results were released. Its biggest single-day gain reached +15.3%, and its steepest decline was -6.81%; the stock closed higher in three of the four sessions. With expectations already this high, whether it can beat them again is the real question.
02 The steeper the drop, the cheaper the valuation
This storage rally began with a surge in demand for AI computing power. Starting in the second half of 2025, global memory chips entered a phase of rising prices and volumes, and the industry was widely said to be entering a supercycle. But as prices reached lofty levels and gains began to slow, market concerns followed: how long can such strong conditions last? Those worries quickly showed up in share prices. Four core players—SK hynix, SanDisk, Samsung Electronics, and Micron Technology—have generally fallen 30% to 50% from their respective peaks. DRAM, an ETF tracking the storage sector, has also pulled back more than 40% from its high, with declines especially concentrated over the past two weeks.
So the focus of the market debate has quietly shifted. Before, everyone was asking how high profits could get this quarter. Now they’re asking: how many more quarters can this cycle last?
Share prices are down 30% to 40%, so valuations are naturally cheaper.
Citi estimates that SK hynix’s current share price implies a forward 12-month P/E of only about 2.7x. A valuation of just over 2x is extremely low in any industry, and especially rare for a cyclical industry that is still profitable. But cheap doesn’t mean safe; the key is how long this cycle will last.
03 The answer depends not on memory makers, but on their customers
What determines how long this cycle can last is not the memory makers themselves, but their downstream customers. If the major AI giants continue to raise capital expenditure during this earnings season and hyperscalers keep building data centers, demand for memory and the logic behind price increases can continue to flow through. Conversely, if signs emerge that AI spending is cooling, high-priced inventory already locked in under long-term agreements could become a burden. The good news is that leading indicators are holding up. Micron Technology’s previously reported fourth-quarter results and Samsung Electronics’ third-quarter preliminary results point to the same conclusion: supply remains tight. Samsung Electronics’ third-quarter net profit topped 100 trillion won for the first time, surging 783% year over year—one of the clearest pieces of evidence. Another factor supporting tight supply, rarely seen in past cycles, is long-term agreements. Today, long-term contracts between Micron, SK hynix, Samsung, and their customers typically run 3 to 5 years, with HBM-related agreements lasting even longer and including substantial advance payments and price-protection clauses. This means demand in the current cycle is much more visible than in past cycles driven by spot-price increases.
Long-term agreements are the biggest difference between this cycle and previous ones. In the past, memory cycles were “boom and bust”: when prices fell, manufacturers immediately started losing money. But long-term agreements lock in prices and volumes, effectively providing manufacturers with insurance. How long this insurance can last depends on whether AI giants suddenly slam on the brakes on capital spending. So far, there are no signs of that happening.
04 Major banks weigh in: recession fears may be premature
After the sharp drop in share prices, sell-side analysts are speaking up in unison. Three major banks are largely aligned: don’t rush to declare the cycle dead. Nomura Securities maintains its bullish stance, judging that supply bottlenecks will last at least through 2028 and naming Samsung Electronics and SK hynix as its top picks.
JPMorgan puts it more directly: from a medium-term perspective, the current risk-reward has become attractive, and investors should use this pullback to build positions at lower prices, betting that the current upcycle will last longer and climb higher.
Of course, it leaves room for doubt: if supply and demand weaken further, catalysts fail to materialize, or earnings season brings widespread downward revisions, it will withdraw this view.
BofA puts it even more strongly: fears that AI memory is shifting from boom to bust have been overblown, and the recent share-price correction has largely become disconnected from fundamentals. In its view, valuations now look more like they are pricing in a cyclical bottom. Whether the market has really bottomed depends on whether fourth-quarter guidance can restore confidence and put the market back on an upward trajectory—a key variable to watch next.
BofA also takes a longer-term view: the global memory market is expected to grow from nearly $1 trillion in 2026 to more than $2 trillion in 2030, while the industry’s total market capitalization could head toward $10 trillion, compared with only a few trillion dollars today.
The three major banks arrive at the same conclusion by different routes: supply bottlenecks remain, long-term agreements provide visibility, and valuations already reflect pessimism. But note that when major banks say “buy the dip,” they mean “in the medium term.” No one can avoid short-term volatility on earnings day. Anyone building a position before earnings should be prepared to withstand sharp swings.
05 Earnings-day volatility alert: SanDisk could see a swing of ±13.5%
According to Market Chameleon data, the expected earnings-day share-price moves for SK hynix and SanDisk are about 9.31% and 13.52%, respectively, with implied volatility of about 67.70% and 75.7%. Notably, SanDisk’s IV percentile is only 12%, a relatively low level.
From an options-strategy perspective, the market is currently weighing two typical approaches: first, a bullish single-leg LEAPS Call, based on betting on both a medium- to long-term rise and a reversion of IV to the mean; second, a long-volatility straddle, which makes no bet on direction and instead bets that the stock will make a large move after earnings, with the maximum loss locked in when the position is opened.
Options strategies are tools, not answers. High volatility on earnings day means both opportunities and risks are amplified. A straddle may seem to “make no bet on direction,” but if the stock moves less than expected, time decay can still eat into the principal. Any strategy should be considered in light of one’s own risk tolerance, and decisions should be made independently.
06 Beyond the three giants, what other stocks are there?
Hong Kong stocks: GigaDevice, Montage Technology, Longsys.
Hong Kong-related ETFs: CSOP 2x Long SK hynix, CSOP 2x Long Samsung, CSOP KOSPI, CSOP 2x Short Samsung.
U.S. stocks: Micron Technology, SanDisk, SK hynix, Western Digital, Seagate Technology.
U.S. industry ETFs: DRAM, RAM, DISK.
After a sharp sell-off, the storage sector, seen by the market as a barometer for the AI trade, is about to face its most important test. Next week, three giants—SK hynix, Samsung Electronics, and SanDisk—will report quarterly results in succession. The answers on whether the cycle can keep climbing are likely hidden in these earnings reports.
01 How high are expectations? SK hynix profit up 376%, SanDisk revenue up 362%
First, market expectations. Analyst estimates compiled by S&P put SK hynix’s third-quarter revenue at 99.68 trillion won, up about 307% year over year, with net profit growth potentially topping 376%. SanDisk’s numbers are just as staggering: revenue for its first quarter of fiscal 2027 is expected to be about $10.67 billion, up roughly 362% year over year.
SanDisk is a great case study. In each of the past four fiscal quarters, its earnings per share beat market expectations, while its stock moved an average of ±9.31% on the day results were released. Its biggest single-day gain reached +15.3%, and its steepest decline was -6.81%; the stock closed higher in three of the four sessions. With expectations already this high, whether it can beat them again is the real question.
02 The steeper the drop, the cheaper the valuation
This storage rally began with a surge in demand for AI computing power. Starting in the second half of 2025, global memory chips entered a phase of rising prices and volumes, and the industry was widely said to be entering a supercycle. But as prices reached lofty levels and gains began to slow, market concerns followed: how long can such strong conditions last? Those worries quickly showed up in share prices. Four core players—SK hynix, SanDisk, Samsung Electronics, and Micron Technology—have generally fallen 30% to 50% from their respective peaks. DRAM, an ETF tracking the storage sector, has also pulled back more than 40% from its high, with declines especially concentrated over the past two weeks.
So the focus of the market debate has quietly shifted. Before, everyone was asking how high profits could get this quarter. Now they’re asking: how many more quarters can this cycle last?
Share prices are down 30% to 40%, so valuations are naturally cheaper.
Citi estimates that SK hynix’s current share price implies a forward 12-month P/E of only about 2.7x. A valuation of just over 2x is extremely low in any industry, and especially rare for a cyclical industry that is still profitable. But cheap doesn’t mean safe; the key is how long this cycle will last.
03 The answer depends not on memory makers, but on their customers
What determines how long this cycle can last is not the memory makers themselves, but their downstream customers. If the major AI giants continue to raise capital expenditure during this earnings season and hyperscalers keep building data centers, demand for memory and the logic behind price increases can continue to flow through. Conversely, if signs emerge that AI spending is cooling, high-priced inventory already locked in under long-term agreements could become a burden. The good news is that leading indicators are holding up. Micron Technology’s previously reported fourth-quarter results and Samsung Electronics’ third-quarter preliminary results point to the same conclusion: supply remains tight. Samsung Electronics’ third-quarter net profit topped 100 trillion won for the first time, surging 783% year over year—one of the clearest pieces of evidence. Another factor supporting tight supply, rarely seen in past cycles, is long-term agreements. Today, long-term contracts between Micron, SK hynix, Samsung, and their customers typically run 3 to 5 years, with HBM-related agreements lasting even longer and including substantial advance payments and price-protection clauses. This means demand in the current cycle is much more visible than in past cycles driven by spot-price increases.
Long-term agreements are the biggest difference between this cycle and previous ones. In the past, memory cycles were “boom and bust”: when prices fell, manufacturers immediately started losing money. But long-term agreements lock in prices and volumes, effectively providing manufacturers with insurance. How long this insurance can last depends on whether AI giants suddenly slam on the brakes on capital spending. So far, there are no signs of that happening.
04 Major banks weigh in: recession fears may be premature
After the sharp drop in share prices, sell-side analysts are speaking up in unison. Three major banks are largely aligned: don’t rush to declare the cycle dead. Nomura Securities maintains its bullish stance, judging that supply bottlenecks will last at least through 2028 and naming Samsung Electronics and SK hynix as its top picks.
JPMorgan puts it more directly: from a medium-term perspective, the current risk-reward has become attractive, and investors should use this pullback to build positions at lower prices, betting that the current upcycle will last longer and climb higher.
Of course, it leaves room for doubt: if supply and demand weaken further, catalysts fail to materialize, or earnings season brings widespread downward revisions, it will withdraw this view.
BofA puts it even more strongly: fears that AI memory is shifting from boom to bust have been overblown, and the recent share-price correction has largely become disconnected from fundamentals. In its view, valuations now look more like they are pricing in a cyclical bottom. Whether the market has really bottomed depends on whether fourth-quarter guidance can restore confidence and put the market back on an upward trajectory—a key variable to watch next.
BofA also takes a longer-term view: the global memory market is expected to grow from nearly $1 trillion in 2026 to more than $2 trillion in 2030, while the industry’s total market capitalization could head toward $10 trillion, compared with only a few trillion dollars today.
The three major banks arrive at the same conclusion by different routes: supply bottlenecks remain, long-term agreements provide visibility, and valuations already reflect pessimism. But note that when major banks say “buy the dip,” they mean “in the medium term.” No one can avoid short-term volatility on earnings day. Anyone building a position before earnings should be prepared to withstand sharp swings.
05 Earnings-day volatility alert: SanDisk could see a swing of ±13.5%
According to Market Chameleon data, the expected earnings-day share-price moves for SK hynix and SanDisk are about 9.31% and 13.52%, respectively, with implied volatility of about 67.70% and 75.7%. Notably, SanDisk’s IV percentile is only 12%, a relatively low level.
From an options-strategy perspective, the market is currently weighing two typical approaches: first, a bullish single-leg LEAPS Call, based on betting on both a medium- to long-term rise and a reversion of IV to the mean; second, a long-volatility straddle, which makes no bet on direction and instead bets that the stock will make a large move after earnings, with the maximum loss locked in when the position is opened.
Options strategies are tools, not answers. High volatility on earnings day means both opportunities and risks are amplified. A straddle may seem to “make no bet on direction,” but if the stock moves less than expected, time decay can still eat into the principal. Any strategy should be considered in light of one’s own risk tolerance, and decisions should be made independently.
06 Beyond the three giants, what other stocks are there?
Hong Kong stocks: GigaDevice, Montage Technology, Longsys.
Hong Kong-related ETFs: CSOP 2x Long SK hynix, CSOP 2x Long Samsung, CSOP KOSPI, CSOP 2x Short Samsung.
U.S. stocks: Micron Technology, SanDisk, SK hynix, Western Digital, Seagate Technology.
U.S. industry ETFs: DRAM, RAM, DISK.
