Industry Disputes Morgan Stanley’s Drastic Price Target Cuts for SK Hynix and Samsung

On September 15, Morgan Stanley released a report that drastically cut SK Hynix’s target price by 54% from 260,000 won (about $200) to 120,000 won, and Samsung Electronics’ target price by 27.6% from 105,000 won to 76,000 won. The reasons cited were a decline in demand for general-purpose DRAM due to lower demand for smartphones and PCs and an oversupply of high-bandwidth memory (HBM), which led to price drops. Morgan Stanley also lowered its investment recommendation on the Korean technology sector from “neutral” to “cautious”.

The report, titled “Winter Looms,” follows last month’s “Prepare for the Peak,” which warned of an AI bubble. The report consistently took a pessimistic view of Korean memory semiconductor companies, citing sluggish demand for general-purpose DRAM and an oversupply of AI-specific HBM.

Morgan Stanley predicts that next year, HBM supply by memory companies will reach 250 billion gigabits (Gb), exceeding demand (150 billion Gb) by 66.7%. It also predicts that Samsung Electronics’ full entry into the HBM market will be a major cause of the oversupply.

The semiconductor industry sees this outlook as excessively pessimistic. They claim that Morgan Stanley ignored the characteristics of the HBM market, which produces customized products with customer approval. SK Hynix and Samsung Electronics have publicly announced that “HBM volumes are sold out until 2025.”

Critics also claim that Morgan Stanley has underestimated the AI ​​investment of major tech companies, which is the basis for HBM demand. The report predicts that the AI ​​investment growth of 10 major tech companies will drop significantly from 52% this year to 8% next year. This contrasts with Bloomberg’s forecast of a 33.7% increase this year and a 13.4% increase next year for 13 major tech companies. Mizuho Securities also stated: “The HBM market will continue to grow as AI server investment increases.”

Morgan Stanley also expects general-purpose DRAM to peak in the fourth quarter of this year and decline from next year through 2026, citing the lack of recovery in consumption of IT products that use semiconductors. The global PC and smartphone markets are indeed sluggish, with reports indicating that pre-order volume for Apple’s ‘iPhone 16’ series fell 13% during the first weekend of its release compared to its predecessor. However, Samsung Electronics and SK Hynix stated: “Demand for memory for smartphones and PCs is neither decreasing nor increasing.”

Many believe that Morgan Stanley’s outlook on the general DRAM market is too pessimistic about the “mismatch between supply and demand.” Morgan Stanley cited next year’s memory capital expenditures reaching $100 billion (about 133 trillion won) as one of the reasons for the oversupply. However, as semiconductor companies focus on high-end products such as HBM and enterprise SSDs, many analysts believe the likelihood of general DRAM oversupply is low.

Morgan Stanley’s dismissal of Samsung Electronics and SK Hynix’s claim that “focusing on HBM production will inevitably reduce the supply of general-purpose DRAM” as “unfounded” also lowers the report’s credibility. Furthermore, the report omitted the growing market for AI PCs and AI phones, which use more than twice as much general-purpose DRAM and NAND flash as mainstream products.

An industry insider criticized the following: “Morgan Stanley often exhibited an ‘Indian rain dance’ behavior and continued to spread negative news until the market collapsed.”