Investing.com – South Korean memory chipmakers are facing unjustified stock pullbacks over unfounded fears of a cyclical downturn, as supply chains remain severely tight and artificial intelligence infrastructure drives unprecedented demand, according to a report by Citi Research.
The Wall Street bank reiterated its “Buy” ratings on market heavyweights and , dismissing recent investor anxieties surrounding sluggish Chinese smartphone sales and elevated channel inventories.
Severe inventory depletion
Market sentiment has taken a hit in recent weeks amid debates over whether dynamic random-access memory (DRAM) and NAND flash memory cycles are peaking. However, Citi’s analysis shows that inventory levels across the memory ecosystem remain at critically low levels compared to historic norms.
“Contrary to market concerns, we find memory inventory levels to be materially low at both memory suppliers and their customers,” Citi analysts wrote in the note. “With a lean memory inventory situation across the supply chain, rising demand will result in persistent undersupply.”
Citi highlighted that supply-and-demand sufficiency ratios for major manufacturers have plummeted from 70% to 50%, signaling that production capacity is falling far short of global orders.
AI workloads drive next-leg demand
While softer demand for consumer electronics in China has weighed on market optics, Citi expects new enterprise use cases to easily absorb supply and push prices higher.
The surge is expected to be led by growth in context memory extension (CMX) architectures, which are propelled by Key-Value (KV) cache requirements as enterprise adoption of autonomous AI agents accelerates. Additionally, Quad-Level Cell (QLC) solid-state drives are being increasingly deployed as near-GPU storage solutions to remove data bottlenecks and improve overall computing efficiency.
Citi points to hardware advancements like Nvidia’s Vera Rubin architecture, which incorporates 16-terabyte TLC SSDs for CMX operations, requiring 1,152 terabytes of high-speed SSD storage per Rubin server system.
The bank estimates CMX NAND demand will reach 34.6 billion 8Gb equivalents, before expanding to 115.2 billion 8Gb equivalents – accounting for roughly 2.8% and 9.3% of total global NAND demand, respectively.
Stocks to watch
Samsung Electronics Co Ltd was retained at Buy, with analysts expecting its dual exposure to high-density NAND and advanced DRAM architectures to position it well as server deployments accelerate.
SK Hynix Inc was also retained at Buy. As a primary high-bandwidth memory supplier for top-tier GPU makers, the company remains a key beneficiary of the tight hyperscaler supply chain.