HSBC is maintaining a positive stance on Asian memory chip producers, saying investor fears that the semiconductor memory cycle is approaching its zenith are premature. The bank's view follows discussions with over 30 investors held across Asia between July 6 and July 10, during which market participants outlined several concerns that have weighed on sentiment.
Analysts Ricky Seo and Han Kil Chang summarised the key investor apprehensions as a potential reduction in share-price catalysts. Investors cited several factors behind that worry: a slowdown in memory earnings growth, Meta's entry into the cloud server market as a possible indicator of decelerating capital expenditure, and the pressure that aggressive capacity expansion could exert on the supply-demand balance for memory products.
Additional investor-flagged risks included elevated memory bill-of-material costs, which could encourage customers to de-spec products; the possibility of delayed uptake of new memory technologies; and the threat posed by Chinese rivals that may use aggressive financing to build fresh capacity.
Despite these headwinds, HSBC's analysts pointed to a set of nascent catalysts that could support the sector. They expect high-bandwidth memory (HBM) prices to receive upward pressure after a rally in commodity DRAM, and they anticipate further average selling price (ASP) gains as the market begins adopting HBM4. The bank also highlighted growth prospects for SO-CAMM2 - a mobile DRAM-based module linked to expansion in ARM-based central processing units - and noted potential incremental NAND demand coming from context memory storage used to support AI agents.
HSBC emphasised that the emergence of long-term supply agreements, spanning three to five years, should enhance earnings visibility over the next two to three years while reducing earnings volatility. The analysts suggested that this improved predictability could be a foundation for higher valuations for memory companies.
Improving shareholder returns were listed as another constructive factor. HSBC referenced guidance from Samsung Electronics indicating the company plans to allocate 50% of free cash flow to shareholder returns during the 2024-26 period.
The analysts drew an analogy between the current environment and the 1990-95 PC supercycle, arguing that agentic artificial intelligence could boost office productivity and reshape workflows. On that basis, HSBC expects cloud service providers to continue expanding capacity as they vie for a rapidly growing market, rather than pulling back.
HSBC also anticipates that the transition to HBM4 will quicken HBM price rises relative to commodity DRAM. The bank flagged heightened investor interest in Samsung Electro-Mechanics (SEMCO), pointing to a strengthening FC-BGA substrate cycle, an accelerating multi-layer ceramic capacitor (MLCC) upswing driven by greater AI server content, and progress in newer components such as silicon capacitors and glass substrates.
Within Korean technology stocks, HSBC expressed a preference for SK Hynix (KS:000660), citing the company's larger exposure to HBM and SO-CAMM2. The analysts estimated SK Hynix's HBM market share could remain at 50-55% in the 2027 HBM4 era. The bank also maintains a Buy rating on Samsung Electronics (KS:005930), pointing to HBM4 catch-up potential, an anticipated recovery in foundry demand, and expectations for additional commodity DRAM price increases in the second half of 2026.
Summary
HSBC, after investor meetings across Asia, defended its bullish outlook on memory chipmakers. It cited developing catalysts - HBM price support, HBM4 adoption, SO-CAMM2 growth, NAND demand for AI context memory, and multi-year contracts - which should improve earnings visibility and support valuations, while noting investor concerns around capacity expansion, rising costs, and competitive financing in China.
Key points
- HSBC remains bullish on Asian memory makers, arguing that concerns about a cycle peak are premature.
- New catalysts include expected HBM price rises with HBM4 adoption, SO-CAMM2 growth tied to ARM CPU expansion, and emerging NAND demand from AI context memory.
- Long-term supply agreements and improved shareholder return guidance (Samsung targeting 50% of free cash flow to returns in 2024-26) could enhance earnings visibility and valuation support.
Risks and uncertainties
- Slower memory earnings growth and potential capex deceleration among cloud service providers could weigh on sector revenues - affecting chipmakers and cloud infrastructure providers.
- Aggressive capacity additions and elevated bill-of-material costs could disrupt the supply-demand balance and prompt customer de-specing, impacting both memory producers and OEMs.
- Competitive pressure from Chinese firms pursuing aggressive financing to expand capacity represents a risk to market share and pricing for established suppliers.