Mizuho analyst Vijay Rakesh had a Buy rating on Micron Technology, Inc (NASDAQ:MU) with a price target of $100.
Rakesh had a Buy rating on Seagate Technology Holdings Plc (NASDAQ:STX) with a price target of $100.
Rakesh had a Buy rating on Western Digital Corp (NASDAQ:WDC) with a price target of $$66.
The March quarter is witnessing a notable acceleration in NAND contract pricing, with a 30% quarter-over-quarter increase, surpassing both previous estimates and the consensus expectation of a 10% rise.
The analyst stated that this trend will likely continue through 2024, with projected quarterly increases in NAND contract pricing and yearly growth in NAND content by 10-15%.
AI handsets may see a significant rise in NAND storage, potentially reaching 1-2TB, doubling the current capacity.
Additionally, as per Rakesh, AI training servers are likely to benefit from substantial DRAM gains, especially with High Bandwidth Memory (HBM).
The industry’s NAND Capital Expenditures (Capex) are predicted to remain conservative, with no significant increases through 2024, indicating a controlled investment environment. Western Digital will likely continue expanding its new fabrication plants, supported by a considerable total Capex, partly funded by the Japanese Government.
This strategic investment underscores the industry’s cautious but targeted growth approach.
Micron, Seagate, and Western Digital have been given vital price targets, reflecting confidence in their potential growth.
WDC’s transition to BiCS8 technology is expected to enhance its economic position despite competition from Samsung and SK moving to higher layer counts.
The likely spinoff valuations for WDC indicate a significant upside, with projections showing about a 40% increase in its current share price, Rakesh said.
Memory chip manufacturers are focusing Capex on advanced memory types like HBM for AI applications and DDR5 for broader market needs.
This focus is partly driven by the anticipated demand for higher-performance memory in various applications, from AI to consumer electronics.
Despite concerns over DDR5 pricing due to soft demand in some sectors, shifting towards high-bandwidth memory like HBM3e will likely contribute positively to manufacturers’ revenue and gross margins.
The outlook for Hard Disk Drive (HDD) pricing is stable to positive as enterprise demand recovers, indicating a balanced market response to evolving storage needs.
Overall, the semiconductor and storage industry is poised for a dynamic year, with strategic investments and product innovations to meet the growing demand for high-performance computing and storage solutions.
Rakesh noted further upside to Western Digital, given improving HDD multiples and NAND pricing upside ahead of the March and June quarter consensus.
For Micron, he said an August and November quarter HBM3e B100 ramp could position the stock for significant upside.
Price Actions: MU shares traded lower by 0.38% at $80.40 on the last check Wednesday. STX shares traded lower by 3.07% at $84.11, and WDC shares traded lower by 2.17% at $52.96.