Morgan Stanley upgrades Macronix on supply tightness and AI-driven demand resurgence

Morgan Stanley has boosted its outlook on Taiwan-based Macronix, citing supply shortages and increasing demand from AI applications, leading to a near doubling of the stock’s price target and a shift to an overweight rating.

Morgan Stanley has significantly upgraded its outlook on Taiwan-based Macronix International, boosting the stock rating from Underweight to Overweight and nearly doubling the price target from NT$16.5 to NT$29. The investment bank cites robust pricing trends in NOR and SLC NAND flash memory, which together comprise approximately 70% of Macronix’s revenue, as the primary driver behind this decisive upgrade. The analysts, led by Daniel Yen, forecast a sustained undersupply in NOR flash lasting through 2026, alongside a severe shortage of high-density SLC NAND due to capacity cuts at major players such as Kioxia and Micron. They predict this supply-demand imbalance will support elevated prices, enabling Macronix to return to profitability in 2026 with projected earnings per share of NT$0.09, growing to NT$0.57 in 2027.

The bank’s revised outlook includes notable assumptions of average selling price increases in wafer segments, anticipating NOR flash prices to rise by 6%, 30%, and 32% over 2025 to 2027, respectively. NAND prices are expected to increase more modestly by 1%, 8%, and 8% in the same period. Morgan Stanley highlights that, while the market has somewhat factored in these price gains, the persistent structural supply-demand imbalance suggests these increases could prove more sustainable. They also caution investors on potential risks, including unexpected production expansions by competitors or weaker-than-expected demand from end markets.

Broader industry data corroborates some of these expectations. TrendForce reports an anticipated price rise for NAND flash memory by 5 to 10% in the fourth quarter of 2025, driven by increased demand for QLC (quad-level cell) products, notably in enterprise SSDs. This demand surge is partly attributed to shortages in hard disk drives (HDDs) and extended lead times, pushing major suppliers like SanDisk to increase prices, while Micron has temporarily halted quotations due to capacity and pricing pressures. However, contrasting reports indicate that NAND flash prices may face downward pressure in some segments due to oversupply and muted demand from PCs and smartphones. TrendForce notes that production cuts have been adopted to help restore balance and support a price rebound, with industry growth forecasts for 2025 revised downward.

Regarding product developments, Macronix is set to expand its supply of low-cost 3D NOR flash for mid-range densities from 1Gbit to 8Gbit starting in 2025. The company is positioned in a market where Serial NOR flash, delivering high-speed access in smaller densities (256Mbit-2Gbit), sits alongside growing competition from SLC and SPI NAND suppliers. An evolving landscape for Code Storage Flash, which meets mid-range density demands in embedded applications, is also shaping Macronix’s competitive context.

Historically, Macronix has seen notable trading activity linked to chip shipments for set-top box applications, a niche for its 19-nanometer SLC NAND flash chips that helped boost its market presence. Its strategic focus on niche memory products has enabled it to navigate volatile market conditions while positioning itself to benefit from the ongoing AI-driven demand that is creating “multiple new drivers of AI-led memory strength,” according to Morgan Stanley analysts. This underscores the theme that legacy memory segments remain tight as AI applications cannibalize capacity, potentially leading to sustained demand and pricing power for suppliers like Macronix.

Overall, Morgan Stanley’s upgraded stance on Macronix reflects optimism grounded in supply shortages and pricing strength in legacy memory markets. While market dynamics remain sensitive to competitive shifts and changing end-demand patterns, the fundamental view is that Macronix is poised for a profitable turnaround supported by these structural trends.

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Source: Noah Wire Services