Goldman Sachs Raises KnightEx Target Price, AI Storage Demand to Push NAND Cycle to New Heights

BlockBeats News, July 1st - Against the backdrop of continued high storage demand driven by AI data center construction, Goldman Sachs has raised the 12-month target price for Japanese NAND flash manufacturer Kioxia Holdings to 116,000 yen and maintained a Buy rating. The bank believes that the tight supply-demand situation in the NAND market exceeds previous expectations, and the price uptrend may continue until mid-2027, and even persist in some segments until 2028.

In a report on June 30th, Goldman Sachs stated that it has raised Kioxia's operating profit forecast for FY3/27 to FY3/29 by 9%, 19%, and 29% respectively, and EPS forecasts by 10%, 19%, and 29% respectively. The bank expects that on a calendar year basis, the average selling price of NAND will rise significantly in 2026 and continue to grow by 38% in 2027, higher than the previous expectation of 27%. The report mentioned that Japanese channel checks indicate that major memory manufacturers are still prioritizing capital expenditures towards DRAM rather than significantly increasing new NAND capacity on a large scale; against the backdrop of AI demand expansion, the new NAND supply increment may not be significantly released until 2028.

This has brought Kioxia back into investors' focus. In the past few cycles, the NAND market has always been seen as an easier to oversupply, more cyclical storage sector, as the number of participants is higher compared to the DRAM and HDD industries. However, Goldman Sachs believes that the profit peak of this upswing cycle may be higher than previously assumed by the market and can be sustained longer. Reasons behind this include the rise in enterprise SSD demand, alternative demand due to tight HDD market supply, and US export controls that may affect some Korean manufacturers' equipment supplies to Chinese factories.

The Kioxia management has also recently sent signals that they are more focused on price and profit margins. Goldman Sachs stated that the company is not eager to lock in shipments through long-term agreements but emphasizes price discipline and gross margin levels. As some price negotiations for first-quarter bit shipments were not completed at the time of the company's guidance release, Goldman Sachs expects Kioxia's first-quarter operating profit for FY3/27, to be announced on July 31st, to reach 1.417 trillion yen, higher than the company's guided 1.298 trillion yen and Bloomberg's consensus expectation of 1.36 trillion yen.

In terms of investment logic, Goldman Sachs values two points. First, Kioxia is the world's third-largest NAND flash manufacturer with relatively strong cost competitiveness. Second, the company is gradually developing products for data centers, which are expected to be the faster-growing segment of the NAND market. With the increasing demand for AI servers and enterprise SSDs for high-performance storage, Kioxia has the opportunity to achieve higher profit margins during the price uptrend cycle.

However, Goldman Sachs also reminded that the NAND industry still exhibits cyclicality. Risks include a slowdown in AI investments, the emergence of Chinese NAND manufacturers, rising costs or fluctuating capacity utilization leading to margin compression, a significant appreciation of the Japanese Yen, and a deceleration in NAND demand for non-AI applications. In other words, Goldman Sachs does not believe that the NAND market structure has permanently changed but rather that this AI-driven supply-demand mismatch has pushed the cycle's peak to a higher level than before.