The pitch behind this initiation is not that memory is doing well, but that the market still does not grasp how long the good times will run.
SK Hynix, the South Korean maker of memory chips, has been started at outperform with a price target of 2,560,000 won, implying upside of more than 50% for the Korean stock and over 20% for its US-traded shares.
The argument rests on a shortage Wedbush, the broker behind the call, believes is unlike any before it.
A cycle like no other
The central claim is that demand forecasts for memory will keep climbing until significant new production arrives, and possibly beyond that.
The shortage is severe enough that server makers are stripping specifications from their products simply because they cannot get the chips, while customers show no sign of the inventory build-up that usually signals a cycle peak.
The supply side offers little relief, because a lack of clean-room space has stretched the lead time for new factories into years, meaning meaningful capacity additions before 2028 will be modest.
Even when those factories open, it is unclear when supply will finally catch demand.
Long-term supply agreements should then soften any eventual downturn, keeping cash flowing well past the point where previous cycles would have turned.
Why Hynix, specifically
Liking the sector is one thing, and choosing Hynix as the vehicle is the sharper part of the call.
The broker points to the company's sustained lead in high-bandwidth memory, the specialised chips that feed artificial intelligence processors, as evidence of a strong technology position.
Hynix was early to introduce its most advanced 1c-based designs and dominates the market for QLC, a high-density form of flash storage, both signs of a company at or near the front of the field.
Together these give the broker confidence that Hynix is not merely riding the cycle but leading on the technology that defines it.
That leadership matters because it makes the company's earnings less vulnerable when the cycle eventually turns.
The valuation case
The most compelling reason to prefer Hynix, on Wedbush's reckoning, is price.
The target is built on roughly five times projected 2027 earnings of 491,915 won a share, plus net cash of 97,433 won a share, a multiple the broker calls a historic base valuation for peak-cycle earnings.
The twist is that this cycle, in the broker's view, breaks the usual pattern, with estimates still rising, the peak likely to last longer, and supply agreements extending strong cash flows even after it passes.
Each of those factors, the argument runs, deserves a premium rather than the usual discount applied to peak earnings.
On that logic Hynix should command something closer to the nine times forward earnings the broker applies to rivals Micron and SanDisk, with little to justify the gap beyond where the company happens to be domiciled.
The hidden assets
The final strand of the case is what the valuation leaves out entirely.
Wedbush notes that Hynix owns assets its share price appears to ignore, chief among them Solidigm, its enterprise storage arm.
Valued on the same basis as SanDisk, Solidigm could be worth around 20% of Hynix's market value, against an implied 10% inside the current price.
Hynix could also end up owning close to 30% of the Japanese memory maker Kioxia through a mix of convertible debt and equity, a stake worth perhaps another 10% that the broker's numbers do not capture.
If Kioxia pursues a US listing, that figure could rise further.
The result is a bull case built on three reinforcing ideas, a shortage that lasts longer than history suggests, a company leading on the technology behind it, and a valuation that counts neither the elongated cycle nor the assets sitting quietly on the balance sheet.
