Another逆势 rise yesterday, with Western Digital's stock up over 90% since the beginning of the year. What are the upcoming catalysts for this storage bull market?

In the recent US stock market, the storage sector has performed exceptionally well. Yesterday, while the broader US stock market showed a volatile pullback, the storage sector moved against the trend with strong independent performance, becoming a core allocation direction for both risk-averse and aggressive capital. $SanDisk (SNDK.US)$ rose nearly 10% yesterday and has surged over 90% year-to-date; $Micron Technology (MU.US)$ reached an intraday high of nearly 5% yesterday but closed at 0.62%.

Core logic: The supply-demand gap will continue until 2027.

The main driver of this cyclecomes from the mismatch between strong demand growth and limited supply expansion.In addition to the robust demand for AI servers, the recovery of the general server market is also a key driver.

Looking back at the situation in 2025,we can see that the storage market was largely supplier-driven,Due to product shortages, suppliers held greater bargaining power in pricing negotiations. From a market structure perspective, the storage industry exhibits clear oligopolistic characteristics. This oligopoly means pricing power is highly concentrated among a few companies, allowing leading manufacturers to influence global market prices by adjusting production capacity, thereby exacerbating cyclical fluctuations in the industry.

- DRAM Market: Samsung $CSOP Samsung Electronics Daily (2x) Leveraged Product (07747.HK)$ , SK Hynix $CSOP SK Hynix Daily (2x) Leveraged Product (07709.HK)$ and Micron Technology collectively account for approximately 96% of the market share;

- NAND Flash market: Samsung, SK Hynix, $Western Digital (WDC.US)$ Kioxia, and Micron Technology collectively account for approximately 95% of the market share.

The direct catalyst for this round of market activity at the beginning of 2026 came from $NVIDIA (NVDA.US)$ Jensen Huang's speech at CES., especially NAND. Rubin introduced the "Context Memory" platform, upgrading NAND from traditional "cold storage" to act as a GPU's "secondary cache/long-term memory." In layman’s terms, it evolves from a cheap data warehouse to an expensive 'external brain' for AI.SanDisk's leadership in the storage sector is largely due to its revenue structure being more heavily concentrated on NAND flash products compared to other companies.

Note: NAND (flash memory): A type of non-volatile memory (ROM), which retains data even after power loss, commonly used in external storage devices. Similar to what we refer to as hard drives, SSDs, USB drives, etc., are all types of flash memory; DRAM (Dynamic Random Access Memory), commonly known as 'memory sticks,' stores data by the amount of charge in capacitors and requires periodic refreshing to counteract capacitor leakage; HBM stands for High Bandwidth Memory, which meets the high computing power and large storage demands of the large model era.

New industry variable: The rise of ASICs and Samsung’s 'comeback' on the eve?

The previous rise in storage stocks was mainly driven by the recovery in prices of traditional memory (DRAM and NAND). However, with NVIDIA's introduction of the Rubin GPU platform, demand for HBM4 is expected to ramp up starting in 2026.

From the demand side, the race for AI computing power is far from over. Besides the demand for NVIDIA GPUs, there is a surge in demand for ASIC (Application-Specific Integrated Circuit) chips. Particularly,$Alphabet-A (GOOGL.US)$$Alphabet-C (GOOG.US)$The TPU and$Amazon (AMZN.US)$Trainium, ASIC chips are expected to contribute over 35% of the HBM demand in 2026-2027. This diversification of demand has greatly enhanced the resilience of the HBM market.

On the supply side, due to bottlenecks in CoWoS packaging capacity and extreme capital expenditure discipline among major memory manufacturers, the growth in supply cannot keep up with the explosive demand. JPMorgan's model shows that the supply-demand gap for HBM will not only fail to narrow in the coming years but may tighten further, with the supply-demand gap ratio expected to reach -16% by 2027.

On the supply side, due to bottlenecks in CoWoS packaging capacity and extreme capital expenditure discipline by major memory manufacturers, supply growth cannot keep pace with the explosion in demand. JPMorgan’s models indicate that the supply-demand gap for HBM (Glut Ratio) will not only fail to narrow in the coming years but may tighten further, with the supply-demand gap expected to reach -16% by 2027.The market had previously criticized Samsung's performance in HBM, but the latest signs indicate that Samsung is highly likely to bring a 'surprise' to the market with its HBM4 qualification certification. According to media reports in December last year, Samsung Electronics recently completed the mass production readiness certification (PRA) for HBM4.The chip has reached Samsung’s internal mass production standard, and the company plans to accelerate its entry into NVIDIA's supply chain.Once Samsung successfully enters NVIDIA's supply chain, the release of its massive production capacity will directly translate into earnings elasticity, which may be the biggest source of expectation gap in the near future.

Looking Ahead: Driven by Four Catalysts

In the coming months, we need to focus on the following four key catalysts:

– The 'ticket' to HBM4The period around the end of January will be a critical time window. If Samsung successfully passes NVIDIA’s HBM4 qualification certification, this would mark a significant turning point for its stock revaluation, with JPMorgan predicting it will secure $NVIDIA (NVDA.US)$ 30-35% of the orders.

– Finalizing pricing negotiations：As Samsung, Micron Technology, and SK Hynix are all vying for $NVIDIA (NVDA.US)$ and $Broadcom (AVGO.US)$ customer orders, market concerns over new competition potentially leading to price wars have emerged. The market currently expects the price of HBM3E to decline year-over-year, with HBM4 projected to command a price premium of around 30% over HBM3E. The outcome of upcoming pricing negotiations will directly determine the profit margin ceiling for major memory manufacturers in 2026.

– Cloud vendors’ Capex guidanceAs competition in AI models intensifies, whether cloud service providers might revise their capital expenditure upwards poses a risk. This will form the macro foundation supporting the continued surge in memory demand.

– The possibility of SK Hynix's listing in the United States: According to media reports, the company has received proposals from multiple investment banks and plans to list in the form of ADRs (American Depositary Receipts). By listing through ADRs, SK Hynix can not only narrow the valuation gap with Micron Technology but may also attract capital inflows from passive funds, ETFs, and long-only funds that invest exclusively in US-listed stocks.

Investors should closely monitor Samsung and SK Hynix's Q4 earnings calls at the end of January, especially specific statements regarding HBM4 yield rates and customer certification progress. This will be the most critical point for verifying the above logic.

Options strategy: With a rise of over 90% at the beginning of the year, how should one approach SanDisk's options strategy?

As of January 20th, $SanDisk (SNDK.US)$ 's forward price-to-book ratio (PB) reached 5.5x, higher than $Micron Technology (MU.US)$ 4.5 times. $SanDisk (SNDK.US)$的implied volatility (IV) is as high as 110.99%, itsIV percentile (IV Percentile) reached 89%,This means that the current level of implied volatility in options is at an extremely high position over the past year.

Looking at the options trading data, the Put/Call ratio is around 1.0. Open interest data shows that the positions for calls and puts are roughly equal. This indicates significant market divergence and speculation following the sharp rise. The options market implies that the anticipated fluctuation range for the upcoming earnings week (end of January) is approximately plus or minus20%。

Overall, SNDK.US exhibits a clear technical pattern of strong upward momentum. However, the extremely high short-term RSI and implied volatility in options together send a strong signal: while the market is actively pushing prices higher, it also widely anticipates and prices in potential high volatility in the future.The option premiums are very expensive.While focusing on the continuation of the trend, one should also be prepared for potential sharp price swings.The strategy focus should be on 'DefenseOr,Cost offset'.

1. Conservative approach: 'Enhanced income' strategy for holding underlying shares

While holding the stock, one can sell out-of-the-money Calls (call options), choosing a strike price far enough to avoid being exercised. The goal is to utilize the currently very high IV to sell high-priced Calls, generating premium income to enhance returns. If the share price does not exceed this price, there’s no need to exercise the sale of the underlying shares, allowing you to collect the premium. However, if the share price rises above this level, you may lose additional gains that could have been achieved from your original long position.

2. Conservative type: Want to enter the market but fear chasing highs

Cash-secured Put. The current stock price shows overbought risks on the technical side. If you are bullish long-term but think the current price is high and worry about a possible short-term pullback, yet still want to buy at a lower price, you can take advantage of the currently high volatility to collect premiums. If the stock price pulls back, you can accumulate positions at an ideal low price (strike price - premium). If the stock price continues to rise or moves sideways, you simply pocket the premium. However, it's important to note that selling Puts requires sufficient margin. Always manage your position size carefully.

3. Aggressive type: Betting on explosive earnings reports

Bull Call Spread. Buying Calls directly is too expensive, so costs must be reduced through a “buy low, sell high” approach. While buying in-the-money (ITM) or at-the-money (ATM) Calls, sell an out-of-the-money (OTM) Call with a higher strike price. This significantly lowers holding costs and offsets some of the risk from declining implied volatility (IV). Even if the price consolidates at high levels, as long as there isn’t a sharp drop, there’s still potential for profit. This not only reduces premium expenses but also mitigates some risks from 'volatility reversion.'

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Disclaimer

This content does not constitute any offer, solicitation, recommendation, opinion, or guarantee regarding securities, financial products, or tools. The risk of loss in trading options can be substantial. In certain circumstances, the losses you incur may exceed the initial margin deposited. Even if you have set contingency orders, such as “stop-loss” or “limit” orders, these may not necessarily prevent losses. Market conditions may render such orders unexecutable. You may be required to deposit additional margin within a short period. If you fail to provide the required amount within the specified timeframe, your open positions may be liquidated. However, you will still be responsible for any shortfall in your account resulting from such liquidation. Therefore, before engaging in options trading, you should thoroughly study and understand options and carefully consider whether such trading is suitable for you based on your financial situation and investment objectives. If you trade options, you should familiarize yourself with the procedures for exercising options and the rights and obligations upon exercise or expiration of options.

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