Goldman Sachs raised its target price for Kioxia, citing AI storage demand as driving the NAND cycle to even greater heights.

According to BlockBeats, on July 1st, amidst the continued surge in storage demand driven by AI data center construction, Goldman Sachs raised its 12-month target price for Japanese NAND flash memory manufacturer Kioxia Holdings to ¥116,000 and maintained its buy rating. The bank believes that the supply and demand tension in the NAND market is tighter than previously expected, and the price increase cycle may continue until mid-2027, and even into 2028 in some segments. In its report on June 30th, Goldman Sachs stated that it had raised its operating profit forecasts for Kioxia for FY3/27 to FY3/29 by 9%, 19%, and 29%, respectively, and its EPS forecasts were also raised by 10%, 19%, and 29%, respectively. The bank expects that, on a calendar year basis, the average selling price of NAND will rise sharply in 2026 and continue to grow by 38% in 2027, higher than its previous forecast of 27%. The report states that research in Japanese distribution channels indicates major memory manufacturers are still prioritizing capital expenditures on DRAM rather than significantly increasing NAND production capacity. Given the expanding demand for AI, the increase in new NAND supply may not be significant until 2028. This has brought Kioxia back into the spotlight for investors. In the past few cycles, the NAND market has been considered a more cyclical and easily oversupplied memory sector due to its larger number of participants compared to the DRAM and HDD industries. However, Goldman Sachs believes that the profit peak of this upward cycle may be higher than previously assumed and could be sustained for longer. The reasons behind this include rising demand for enterprise-grade SSDs, substitution demand due to tight HDD supply, and the potential impact of US export controls on equipment supply to some South Korean manufacturers' factories in China. Kioxia's management has recently signaled a greater emphasis on price and profit margins. Goldman Sachs states that the company is not in a hurry to lock in shipments through long-term agreements, but rather emphasizes price discipline and gross margin levels. Because price negotiations for some Q1 bit shipments were not yet finalized when the company issued its guidance, Goldman Sachs expects Kioxia's FY3/27 operating profit, to be announced on July 31, to reach ¥1.417 trillion, higher than the company's guidance of ¥1.298 trillion and Bloomberg's consensus estimate of ¥1.36 trillion. Goldman Sachs focuses on two key investment rationale. First, Kioxia is the world's third-largest NAND flash memory manufacturer, possessing relatively strong cost competitiveness. Second, the company is gradually developing products for data centers, which are expected to be the fastest-growing segment of the NAND market. With increasing demand for high-performance storage from AI servers and enterprise-grade SSDs, Kioxia has the opportunity to achieve higher profit margins during periods of rising prices. However, Goldman Sachs also cautions that the cyclical nature of the NAND industry has not disappeared. Risks include a slowdown in AI investment, the rise of Chinese NAND manufacturers, declining profit margins due to rising costs or fluctuations in capacity utilization, a significant appreciation of the yen, and the impact of non-AI applications.