Written by: Rita

The storage sector is undergoing multiple structural changes, with pricing mechanisms, product forms, and demand structures all being rewritten.

On August 12, JPMorgan released comments from its U.S. hardware and semiconductor experts, covering multiple themes including expectations from SanDisk's investor day, trends in HBM customization, changes in eSSD demand structure, progress in the commercialization of Quantinuum quantum computers, and updates on Supermicro's performance. A recurring underlying theme is: AI is changing the operational logic of the storage and computing industries from both the demand side and the supply side, long-term agreements (LTAs) are trying to smooth cycles, HBM is moving toward customized SKUs, and enterprise SSDs have accounted for nearly half of NAND shipments.

SanDisk Bets on a Low Volatility High Growth Combination

SanDisk will hold its investor day on August 13, with the market expecting clearer disclosures on long-term agreements (NBMs) and an updated financial outlook from management.

Morgan Stanley analyst Harlan Sur expects that SanDisk will provide guidance for annual revenue growth exceeding 20%, with gross margins remaining flat and operational leverage driving earnings per share growth of over 20% to 30%, reducing cyclical fluctuations significantly. This is a high bar, and there is still considerable skepticism in the market. However, SanDisk CEO Dave Goeckeler has successfully delivered on similar commitments at Western Digital, thus lending some credibility.

The market also anticipates an updated capital allocation framework. Investor communications indicate that the expected buyback size may be quite substantial, with an annual buyback ratio of around 10%. Overall, investors hope that this investor day can act as a catalyst to restart the recently underperforming stock price.

Progress on SanDisk's long-term agreements (NBMs) is another focal point. To date, SanDisk has signed 8 customers and 10 agreements, covering over 50% of the 2027 fiscal year's wafer capacity and about three-quarters of the 2028 fiscal year's capacity, with a minimum revenue commitment of $93.9 billion and remaining performance obligations of $59.8 billion. The pricing mechanism is shifting from purely spot pricing to a two-way protection mechanism with price floors and ceilings.

HBM is Entering the Era of Customization

Micron's Executive Vice President Sumit Sadana stated that the HBM market is entering the "custom SKU" era, starting from HBM4E. Due to the high costs and time associated with certification, clients are unlikely to distribute orders among all three suppliers, pushing the market towards a dual-supplier or even single-supplier model for each project, which is significantly different from the current supply model. Micron, SK Hynix, and Samsung are diverging in execution models: SK Hynix is building a "One Team" tripartite joint structure with Nvidia and TSMC, while Micron and Samsung prefer an integration model. Supplier selection and allocation will be key swing factors for profit margins in AI infrastructure and storage pricing by 2027.

This exacerbates the existing capacity squeeze. The capacity encroachment ratio of HBM production on traditional DRAM is currently 3:1, and HBM4E will further deteriorate to approximately 4:1, meaning HBM growth will structurally tighten DDR supply.

eSSD Accounts for Nearly Half of NAND Shipments

The shift of AI workloads from training to inference is reshaping the demand structure for NAND. Enterprise SSDs now account for 48% of global NAND shipments, up from just 26% a year ago. Inference workloads require high-speed processing of KV caches and data sets, driving a surge in eSSD demand while tightening supplies of consumer-grade products, resulting in a fivefold year-on-year revenue increase in the industry.

The supplier landscape is also changing. Samsung remains the leader in shipments (with a 25% share, down from 32% in Q2 2024) but is shifting capacity from NAND to higher-margin DRAM. SK Hynix ranks second with a 22% share, up 40% quarter-on-quarter, primarily due to its subsidiary Solidigm. YMTC (Yangtze Memory Technologies) has entered the global top three for the first time with aggressive 267-layer 3D NAND capacity expansion, surpassing Kioxia with a 14% share.

However, YMTC's shipments have not yet translated into revenue, ranking fifth in revenue, lagging behind Micron and Kioxia, because its product mix remains primarily consumer-grade, with limited high-priced enterprise eSSD contributions. Morgan Stanley notes that the investment margins by 2027 will depend on the product mix (server/eSSD ratio) rather than mere market share.

Quantum and Servers Provide Marginal Catalysts

Quantinuum and Supermicro are two other subjects worth noting in this expert commentary. Quantinuum's commercialization of quantum computers is accelerating. The company has raised its CY26 revenue guidance to about $30 million (+12.8%), and CY27 guidance exceeds $60 million (+34%), far exceeding the previous consensus of around $45 million, with incremental revenue coming from Oracle Helios deployment revenue recognition, ramp-up in Singapore Helios, additional sovereign demand, and the commercialization launch of the Sol system in 2H27. Oracle, as the third Helios deployment customer (after Colorado and Singapore), is noteworthy, as Oracle has directly purchased the system for integration into Oracle Cloud Infrastructure. The return of the first Sol trap chip from Honeywell is a key risk mitigation point. Morgan Stanley maintains a $97 price target and an overweight rating.

Supermicro's F4Q26 EPS exceeded expectations, with a gross margin of 17.6%, significantly surpassing the guidance range of 15% to 17%, benefiting from improvements in customer/product mix, reduced inventory reserves, and lower tariff costs. However, management indicated that the strong margins are largely temporary, as the AI mix is expected to rebound from about 60% in the last quarter to over 80% in F1Q27. More sustainably, the order side showed orders exceeding $60 billion at the end of F4Q, with a record backlog supporting FY27 revenue guidance of $65 billion to $72 billion (approximately $30 billion year-on-year increase). Morgan Stanley raised its FY27E EPS by 77% to $4.70, and raised the price target from $32 to $45, but maintains a neutral rating, as the sustainability of gross margins, operational capital drag, and ongoing board investigations into export controls keep the risk-reward ratio balanced. The current stock price reflects about 7 times CY28E EPS, indicating that governance and margin concerns offset strong demand fundamentals.

Morgan Stanley's judgment is that memory chips are evolving from a commodity cycle to a structural cycle. The overlap of LTAs, HBM customization, and changes in eSSD demand structure is altering the valuation framework for the storage industry. The market's pricing of the storage cycle may still be stuck in the old framework of the traditional commodity cycle, while this structural change suggests that valuation methods may need to be adjusted.

Disclaimer

This article is a compilation and interpretation of third-party brokerage research reports (JPMorgan, August 12, 2026) by ChaoXiang Research, combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited in this article are solely the views of the respective brokerage analysts and do not represent the views of ChaoXiang Research, nor do they constitute any investment advice.

Markets carry risks; decisions should be made independently. This article should not serve as the basis for buying or selling any securities.