Overview

Citi strategists view the current AI‑driven memory upcycle as being in its early stages and believe it has the potential to outperform the industry’s previous major upcycle that ran from 2001 to 2007. They compare the present cycle to the seven‑year NAND upcycle that was propelled by new consumer applications such as MP3 players and digital cameras, which displaced older analog media.

Market Context

Memory‑related equities have experienced a sharp pullback after a prolonged rally. Micron (NASDAQ:MU), Samsung Electronics Co Ltd (KS:005930) and SK Hynix (KS:000660) are each down more than 20 % from their recent highs, a decline attributed to concerns over stretched valuations and heightened AI‑related capital‑expenditure spending.

Citi’s Assessment

Citi argues that the current cycle is likely to exceed the performance of the 2001‑2007 upcycle because AI demand is driving growth in both DRAM and NAND segments. The firm points to the signing of three‑ to five‑year long‑term agreement (LTA) contracts by customers as evidence that the upcycle may persist longer than initially expected. Citi also highlights a persistent shortage of high‑bandwidth memory (HBM) chips, which it expects will cause AI chipmakers to shift from a “scale‑up” to a “scale‑out” strategy, deploying a larger number of GPUs with lower HBM content per unit.

Technical Forecasts

Despite a reduction in HBM content per GPU, Citi projects that total HBM capacity per AI system will increase by 434 %, rising from 20.7 terabytes to 110.6 terabytes as the number of GPUs per system expands from 72 to 576.

SK Hynix Specific Outlook

During its second‑quarter earnings call, SK Hynix indicated that it is reviewing shareholder‑return options. Citi expects the company to announce a shareholder‑return program ahead of its third‑quarter earnings release, citing clearer mid‑to‑long‑term earnings visibility supported by the ongoing AI memory upcycle and substantial advance payments secured through LTA agreements.

Recommendations and Targets

Citi reiterates a Buy rating on SK Hynix, raises its 2026 operating‑profit estimate by 4 % and its 2027 estimate by 3 %, and maintains a price target of 3,100,000 won.

Publication Details

The article, authored by Vahid Karaahmetovic, was published on 6 August 2026 at 06:02 pm under the Stock Market category and is sourced from Reuters.