Morgan Stanley labels the recent pullback in memory stocks a healthy reset, noting DRAM pricing has nearly doubled since February and expects 20%–30% price hikes in Q3 2026 to sustain year-on-year growth. It projects long-term supply deals covering over 70% of output, supporting a potential PE re-rating from 5x to 8–10x.
Morgan Stanley characterizes the recent pullback in memory stocks as a healthy reset rather than a cycle turning point, emphasizing that earnings revisions remain robust and in line with the rally leading up to the decline.
DRAM pricing has almost doubled since February, and lead times have stretched significantly, with the firm forecasting 20% to 30% price increases in the third quarter of 2026 to keep year-on-year growth accelerating.
The firm anticipates long-term supply agreements will account for more than 70% of total DRAM output over the next three to five years, laying the groundwork for a valuation rerating from approximately 5x earnings to 8–10x.
Although new capacity slated to come online by late 2027 may eventually ease memory prices, rising AI inference demand—enhanced by lower DRAM costs—could generate fresh consumption and support sustained pricing strength.
Barrons
