Morgan Stanley warns that storage stocks may be at the top of the cycle, and low valuations could become a trap

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Morgan Stanley: Storage stocks appear to have their lowest valuations at the top of the cycle, but are actually in the most dangerous position

BlockBeats news,October 13, Morgan Stanley’s latest report points out that Samsung and SK SK hynix currently have forward P/E ratios of only about 3 to 4 times, appearing cheap but potentially concealing a valuation trap at the top of the cycle. Historically, storage stocks have often peaked ahead of earnings peaks, 2008 years and 2012 years ahead by approximately 4 months, and 2018 years ahead by approximately 8 months. Although the AI-driven storage supercycle is continuing, tight supply and demand, rising prices, and improving earnings continue to provide support; however, as share prices have risen sharply and earnings expectations have been revised upward in unison, optimistic expectations have been fully priced in, and the potential for further gains faces a test.

Morgan Stanley believes that the stronger the storage industry’s fundamentals, the more easily the risk of a cyclical peak may be underestimated, and strong industry conditions may not necessarily translate into sustained excess returns. The report warns that high profits will eventually attract new capacity, with supply expected to be released gradually from the second half of 2027 year, potentially triggering a new cyclical turning point. Asian storage stocks have risen by approximately 2025 times in total since September year, and consensus earnings-per-share expectations have been raised by an average of 9; the low P/E ratios of Samsung and 432%SK hynix may be a typical trap for cyclical stocks near the peak of earnings. To support the upside implied by current share prices,SK contract prices would need to rise by another approximately DRAM quarter on quarter, which would be very difficult. In addition, the evolution of data center architecture may change the distribution of industry-chain gains: in NVIDIA’s 70%single-rack architecture, storage accounts for approximately NVL72; after expansion to 29%interconnected racks, this falls to 8 while the share of networking equipment rises from 19%to 10%; storage manufacturers may not benefit proportionally from growth in 20%infrastructure investment.

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Key points

A Morgan Stanley report said that Samsung and SK SK hynix have forward P/E ratios of approximately 3 to 4 times.
The report said that storage stocks may historically peak ahead of earnings peaks, 2008 years and 2012 years ahead by approximately 4 months, and 2018 years ahead by approximately 8 months.
The report said that supply is expected to be released gradually from the second half of 2027 year, potentially triggering a new cyclical turning point.
Since 2025 year September began, Asian storage stocks have risen by approximately 9 times in total, while consensus earnings-per-share expectations have been raised by an average of 432%。
The report said that supporting the upside implied by current share prices requires DRAM contract prices to rise by approximately another 70%。
The report said that in NVIDIA’s NVL72 architecture, storage may fall from approximately 29%in a single rack to 8 across 19%interconnected racks, while the share of networking equipment rises from 10%to 20%。

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

A low P/E ratio does not necessarily mean that storage stocks are cheap. Because storage-industry earnings are affected by price and supply-and-demand cycles, valuation traps may emerge near earnings peaks; if new supply is released or price momentum slows, both earnings expectations and share prices may come under pressure.

Why it matters to readers

This means that the upside potential for Samsung,SK SK hynix, and Asian storage stocks may be affected by a cyclical reversal, increased supply, and changes in data center architecture.

When assessing stock valuations, do not look only at P/E ratios; also observe whether industry prices, supply and demand, capacity, and earnings expectations are approaching cyclical highs.

Risks and unknowns

The evidence shows that the content comes from BlockBeats’ coverage of a Morgan Stanley report; the full report was not provided.
2027 It remains uncertain whether supply in the second half of the year will be released as expected and whether DRAM contract prices will continue to rise.
The evidence does not provide a conclusion on the impact of changes in data center architecture on storage manufacturers’ actual earnings.

Morgan Stanley warns that storage stocks may be at the top of the cycle, and low valuations could become a trap

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