The super cycle has just begun! Morgan Stanley: The pricing power of traditional storage will "further strengthen" in 2026
Morgan Stanley's report points out that the traditional storage market is entering a strong "super cycle" driven by supply shortages, with DDR4 contract prices expected to soar over 100% by the first quarter of 2026, and NOR Flash prices also set to rise significantly. The report believes that the current cycle is far from over, and market profit forecasts are overly conservative; it is too early to take profits now
As the market's attention is almost entirely focused on the hype surrounding AI high bandwidth memory (HBM), a recent report from Morgan Stanley provides key insights for investors seeking non-crowded trades.
According to the Wind Trading Desk, on December 4th, a Morgan Stanley team led by analysts Daniel Yen and Charlie Chan pointed out in a report on the Greater China technology semiconductor sector that the "traditional storage" market is brewing a perfect storm of supply-demand mismatch. For investors who are still hesitating whether to cash in on the recent rebound, Morgan Stanley's conclusion is exceptionally clear: the cycle has just begun, and it's too early to exit now.
This is not the time to take profits
Morgan Stanley predicted as early as the end of the second quarter this year that the supply shortage in traditional storage would drive a "super cycle." Now, this prediction is coming to fruition, with contract prices starting to rebound at the end of the third quarter. Historically, pure traditional storage upcycle typically lasts for 3-4 quarters, which means the upward momentum is far from exhausted.
The report bluntly states that the market's earnings forecast for 2026 may still be overly conservative:
"This is not the time to take profits... consensus earnings expectations may see very meaningful growth in 2026."
"Crazy" pricing of DDR4 and NOR
The most striking data in the report comes from the dramatic differentiation in the DDR4 market. Driven by enterprise-level demand, initial price negotiations for DDR4 are extremely favorable for suppliers.
Morgan Stanley expects that contract prices in the first quarter of 2026 could soar by over 100%. The current level of supply-demand tension is astonishing, especially with a severe shortage of 16Gb DDR4 products, where channel inventory is nearly zero. This shortage has directly led to a shocking divergence between the spot market and the DRAMeXchange benchmark price:
"Spot prices are as high as $100, while the spot price shown by DRAMeXchange is only $45.5."
Meanwhile, the production cut effect is spreading comprehensively to Flash products. Due to the lower wafer value and rising backend packaging prices, NOR Flash suppliers are reallocating capacity to other products. Morgan Stanley predicts that the supply gap for NOR will expand from low to mid-single digits to "high single digits" by 2026, driving its price up by over 20% in the first quarter of next year.
