Increasing estimates for memory stocks driven by stronger prices: Susquehanna's Hosseini

Summary

Mehdi Hosseini of Susquehanna argues that memory and storage are in a new AI-driven shortage cycle rather than the old smartphone-driven boom-bust pattern. He expects memory content to become a larger share of AI rack costs than compute, with capacity additions taking about two years and prices rising more than expected. He sees memory manufacturers as best positioned to preserve or expand margins in 2026.

• Memory stocks have rallied as AI demand for high-performance memory and storage surges.
• Hosseini says memory is undergoing a paradigm shift from smartphone cycles to AI-driven secular demand.
• AI token generation and data movement require much more storage and DRAM.
• Memory and storage costs could exceed compute costs in AI racks over the next 12 months.
• Physical capacity cannot be added quickly; incremental capacity takes about two years.
• Memory prices are rising more than anticipated, with reported 60-70% increases by SK Hynix and Samsung.
• Hosseini expects memory makers to maintain or expand margins in 2026 as memory is the bottleneck.
• He leaves open whether NVIDIA, TSMC, Dell, or HP may face margin compression.