Nomura Keeps Bullish Target Prices for Samsung and SK hynix

The KOSPI and other indices are displayed on the electronic board at the dealing room of Hana Bank headquarters in Jung-gu, Seoul, on Oct. 20, when the KOSPI closed at 5552.74, down 215.27 points (3.73%). (Yonhap) Global investment bank Nomura maintained its target prices for Samsung Electronics and SK hynix at 670,000 won (about $504.4) and 4,700,000 won(3,538.8), respectively, stating, “The memory supply shortage will continue until 2028.” According to the securities industry on Oct. 20, Nomura maintained a positive outlook on the memory market in its global memory report, ‘AI market concerns and the memory outlook,’ published on Oct. 19, predicting that supply chain bottlenecks will persist until at least 2028. Furthermore, it selected Samsung Electronics and SK hynix as stocks to watch and offered a ‘Buy’ investment opinion for both companies. The target prices were maintained at the previous levels of 670,000 won and 4,700,000 won, respectively. Recently, concerns have been raised in the market that slowing revenue growth among AI companies such as OpenAI and the financing burden on data center operators could lead to a contraction in AI infrastructure investment. The advancement of Chinese company ChangXin Memory Technologies (CXMT)'s 4F² technology has also been cited as a factor raising concerns about intensifying competition in the memory market. Nomura diagnosed that these concerns fail to adequately reflect the expanding scope of AI demand and the profit-generating capacity across the industry. Nomura analyzed, “The market is underestimating the profits that robust AI demand can create across the value chain.” It also evaluated that the market’s concerns regarding CXMT’s transition to 4F² technology are excessive. Nomura estimated that the combined revenue of OpenAI and Anthropic would have increased by approximately 507% in the third quarter of this year compared to the same period last year. It explained that while the quarter-over-quarter growth has recently slowed, the growth rate remains high when compared to the same period last year. In addition, to meet the market expectation of approximately $100 billion for the combined revenue of OpenAI and Anthropic in 2026, it estimated that fourth-quarter revenue must reach approximately $43.9 billion, representing a 61% increase from the previous quarter. However, it projected that even if the revenue run rate as of September is maintained, fourth-quarter revenue will reach approximately $29.7 billion, up 291% compared to the same period last year. The firm evaluated that the possibility of data center operators’ financing burdens leading to an overall contraction in AI investment is also limited. Nomura stated, “The possibility of individual corporate risks developing into a market-wide systemic crisis or derailing the broader AI investment cycle is limited.” The rationale is that even if an individual operator experiences financial difficulties, its GPUs and data center facilities can be acquired or utilized by other operators. According to Nomura’s project tracking data, new global data center capacity is estimated to increase from 22.3 gigawatts (GW) this year to 31.5 GW next year. This year’s increase represents a 77% expansion compared to the previous year. The forecast for new capacity next year also exceeds Nomura’s previous model estimate of 29.7 GW by 6%. Nomura explained, “When combining data center construction forecasts with assumptions regarding system configuration and memory capacity, the growth rate of memory demand is shown to exceed the supply growth rate until at least 2028.” It further stated, “This supports the prospect that memory supply constraints will persist and a favorable pricing environment for memory producers will continue.” The expanding gap in cash-generating ability within the AI value chain was also cited as a factor enhancing the investment appeal of semiconductor companies. The combined net cash of nine semiconductor companies analyzed by Nomura increased from $27 billion in the first quarter of 2024 to $282 billion in the second quarter of this year. By the end of 2028, it is expected to reach approximately $2 trillion.