Citi says AI memory boom has further to run despite 20%+ sell-off in chipmakers

[Elliot_30]

Citi has put out a genuinely bullish note arguing the AI driven memory chip boom still has real room to run, even after Micron, Samsung and SK Hynix have all pulled back more than 20 percent from recent peaks as investors started questioning valuations and the durability of AI infrastructure spending

The banks core argument is that this cycle is structurally different from past memory upcycles, Citi wrote that the current expansion is likely to outperform the 01 to 07 upcycle given that AI demand is driving both DRAM and NAND demand simultaneously, rather than just one segment of the memory market getting pulled along, that dual demand driver is what Citi thinks gives this cycle genuinely more durable legs than previous boom and bust memory cycles investors have lived through before

A big part of the bullish case rests on how customers are actually buying now, unlike previous cycles where purchasing tended to be more spot market and reactive, customers are increasingly locking in supply through long term agreements running three to five years, Citi frames these contracts as a real signal of confidence that elevated demand will persist well beyond the near term, and they also give memory manufacturers themselves much better earnings visibility than theyve historically had, reducing the boom and bust volatility that used to define this sector

On the specific question of high bandwidth memory, the type of memory most directly tied to AI chip performance, Citi acknowledges an interesting wrinkle, ongoing HBM shortages are actually pushing AI companies to redesign their system architectures around more GPUs paired with less HBM per individual chip, but the bank still expects total HBM demand to keep accelerating regardless, forecasting HBM capacity per AI system will grow from 20.7 terabytes to 110.6 terabytes, a 434 percent increase, as GPU counts per system expand from 72 to 576, meaning even with less HBM per chip, the sheer scale of AI systems keeps pushing total demand sharply upward

Citi named SK Hynix as its preferred pick in the sector specifically, expecting the company to announce additional shareholder returns after management recently signaled its capital allocation options are under active review, the bank argued that as mid to long term earnings visibility becomes clearer, supported by the ongoing AI memory upcycle and the substantial advance payments secured through long term agreements, Hynix should be able to offer both a constructive market outlook and decent shareholder returns, Citi maintained its Buy rating, raised its 2026 and 2027 operating profit forecasts, and kept its target price at 3.1 million won

Citi Says AI Memory Boom Still Has Further to Run Despite Recent Sell-Offuk.finance.yahoo.com