From 'Cyclical Stocks' to 'Growth Stocks': A Reshaping of Valuation Logic, Memory Chips May Be at a Historic Pricing Inflection Point

Yesterday, multiple Wall Street investment banks simultaneously raised target prices for memory chip giants, $Samsung Electronics (005930.KR)$ 、 $SK Hynix (000660.KR)$ 、 $Micron Technology (MU.US)$ sending share prices soaring across the board. According to JPMorgan's report, this rally may differ from past cyclical trends—the driving force behind it might not only stem from short-term supply-demand imbalances but could also involvea structural shift in valuation frameworks[1]. This marks the memory chip industry’s transition from the traditional 'cyclical stock' valuation model to a 'growth stock' framework, representing a milestone for global semiconductor investing.

From Price-to-Book (P/B) to Price-to-Earnings (P/E): A Historic Shift in Valuation Anchors

JPMorgan explicitly stated in its latest report that long-term agreements (LTAs) are paving the way for memory chip manufacturers toward a new valuation framework. The traditional valuation system centered on P/B stems from the strong cyclicality of memory chips—the recurring cycle of 'price surges → capacity expansion → price crashes' has played out repeatedly over the past several decades. Extreme earnings volatility rendered P/E ineffective. However, this logic is now being disrupted.

$Microsoft (MSFT.US)$ 、 $Alphabet-A (GOOGL.US)$ 、 $Amazon (AMZN.US)$ 、 $Meta Platforms (META.US)$ Major hyperscale cloud service providers have already locked in approximately 60%–70% of the industry’s server DDR5 shipment volumes through enhanced long-term agreements. These enhanced LTAs typically span 3–5 years with a '2+3' structure (two years of fixed terms plus three years of variable pricing) and introduce, for the first time, a partially fixed pricing mechanism. This significantly enhances earnings visibility for memory manufacturers and systematically smooths out cyclical volatility.

Based on this structural change in the profitability model, JPMorgan has switched its valuation framework from P/B to P/E and accordingly raised target prices substantially: Samsung Electronics’ target price was lifted to KRW 480,000 (based on 2026–27 estimated EPS at an 8x P/E multiple), while SK Hynix’s target jumped from KRW 1.8 million to KRW 3.0 million [1].

A profound upgrade in earnings quality: The revaluation logic behind banks’ new target prices

Micron Technology serves as a highly illustrative case. UBS Group analyst Timothy Arcuri raised Micron’s target price sharply from USD 535 to USD 1,625, with a clear rationale revealing how the market is de-emphasizing short-term price swings and shifting focus toward sustainable, long-term profitability:

Secured shipment volumes:The enhanced LTA has already locked in a high proportion of mainstream DDR5 product output, providing Micron Technology with a stable sales channel for the vast majority of its shipments;

Fixed pricing component:For the first time, the LTA introduced a partially fixed pricing framework for memory products, significantly reducing the traditional cyclical stock risk of 'inertial price crashes';

Valuation benchmark shift:A 15x P/E valuation anchor derived from directly benchmarking against $NVIDIA (NVDA.US)$ NVIDIA's forward P/E reference framework, with the underlying rationale being: 'Given the current environment of high profitability and high visibility, Micron has no reason to trade at a significantly lower P/E multiple than NVIDIA.'

The UBS Group report also explicitly stated that if the market continues to value memory companies as traditional cyclicals, it may systematically underestimate the stability of future revenues and cash flows.[2]

Market skepticism persists: historical anchoring risk in valuation transition

UBS Group’s valuation thesis hinges on the assertion that 'Micron should converge toward NVIDIA’s valuation.' However, it must be noted that historically, memory chip companies have consistently traded at significantly lower P/E multiples than logic chip and AI compute companies, primarily due to the strong cyclicality of the memory industry, which causes earnings to swing dramatically between peaks and troughs. Even though the LTA introduces partial fixed pricing, a substantial portion of the agreement still contains 'variable terms,' meaning pricing adjustment pressures remain during cyclical downturns.

NVIDIA has built an almost unassailable technological moat and pricing power through its GPU (Graphics Processing Unit) architecture and CUDA (Compute Unified Device Architecture) software ecosystem. Its high valuation stems not only from AI demand but also from this ecosystem-driven competitive advantage. In contrast, the memory industry still faces intense competition from peers, with highly standardized products and limited room for differentiation.

Structural Shifts vs. Cyclical Dynamics: How to Position the Samsung Bloomberg Global Semiconductors ETF (3132 HK)?

The LTA mechanism reduces earnings volatility and extends visibility into industry supply-demand imbalances at the business model level, representing the most significant 'positive structural shift' currently embedded in memory chip pricing. However, the risks revealed by the aforementioned market divergence cannot be ignored.

At the asset allocation level, directional bets on individual stocks face significant uncertainty—Samsung Electronics has already posted a year-to-date gain of approximately 100% or more, while SK Hynix’s year-to-date increase is even higher. Confirmation bias driven by momentum chasing also exists across peers. Therefore, for investors seeking exposure to the structural re-rating of memory chips, $Samsung Bloomberg Global Semiconductor ETF (03132.HK)$ this offers a one-click allocation solution, with holdings covering the world’s three memory chip giants—Samsung Electronics, SK Hynix, and Micron Technology—as well as AI chip designers (NVIDIA, $Broadcom (AVGO.US)$ ), advanced process foundries ( $Taiwan Semiconductor (TSM.US)$ ) and equipment segments ( $ASML Holding (ASML.US)$ ）。

The transition in valuation frameworks won’t happen overnight, nor will stock prices move in a straight line. For institutional investors, maintaining a balanced basket of holdings to navigate between long-term structural opportunities and short-term cyclical dynamics may be a more prudent approach.

Source: [1] Bloomberg, as of May 27, 2026

[2] UBS Group, as of May 26, 2026

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