Investing.com — In a note to clients on Thursday, Morgan Stanley defended U.S. memory-chip makers after a sharp pullback, arguing the selloff reflects “a healthy pricing in of durability concerns” rather than a fundamental shift in demand.
Analyst Joseph Moore reiterated Overweight ratings on Micron Technology and SanDisk, saying the underlying strength in memory remains “more durable than the market thinks.”
Moore said the traditional signals of a cycle peak, including flat spot pricing, rising capital expenditure and productivity gains, “have happened and have led to profit taking,” but stressed that “this is anything but normal.”
According to Morgan Stanley, memory has become “THE bottleneck” for AI and next-generation CPU builds, with shortages intensifying and customers now “prepaying for large volume deals.”
The bank acknowledged concerns around valuations, slowing second-derivative metrics and reports of memory optimization efforts such as Google’s TurboQuant.
However, Morgan Stanley said such developments are “just normal course productivity improvement” and do not imply reduced memory demand.
Moore added that AI’s rapidly expanding share of semiconductor spending, potentially “well north of 50%,” means rising supply will struggle to keep pace.
With DRAM slack now gone, he wrote, “everywhere we look we see indications that it is a true bottleneck.”
Morgan Stanley does not expect gross margins near 81% to be permanent but sees little reason for them to weaken soon.
The firm also highlighted the potential for substantial free-cash-flow generation, concluding that “duration is all that matters,” and on that front, indicators “all appear positive.”
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