NAND supply may be tight until 2028! Citi is optimistic that AI demand will drive up memory chip prices and reaffirms SanDisk (SNDK.US) “buy” rating

The Zhitong Finance App learned that Citi Research said that Micron Technology (MU.US)'s latest fiscal quarter results further confirm the continued tight supply trend in the NAND flash memory market. It is expected that the tight supply and demand situation in the industry may continue until 2028, providing support for memory chip prices. Citi believes that the continued growth in demand for artificial intelligence (AI) -driven data centers will further improve the fundamentals of the NAND industry and benefit SanDisk (SNDK.US).

Citibank analyst Atif Malik reiterated SanDisk's “buy” rating in a research report released on Thursday, and the target price remained at $2,100. He pointed out that Micron's latest performance shows that the supply and demand relationship in the NAND market is still beneficial to suppliers, and the long-term increase in demand brought about by AI infrastructure construction has also increased the predictability of the industry's future revenue and profit performance.

Micron NAND's revenue surged 42% month-on-month, and the price increased by about 30%

Micron's fourth fiscal quarter results showed strong growth in the NAND business, and rising product prices were an important driving factor. According to Citi's analysis, Micron's NAND business revenue in the fourth fiscal quarter increased 42% month-on-month, NAND bit shipments increased 10% month-on-month, while the average sales price increased by about 30%. This price increase was significantly higher than the 20% generally expected by the market, but slightly lower than Citi's previous forecast of 34%, reflecting the still high level of supply tension in the NAND market.

It is worth noting that the increase in NAND business revenue clearly exceeded the increase in shipment volume, indicating that price increases contributed significantly to revenue growth. In a situation where supply is relatively limited and demand continues to grow, memory chip manufacturers have received stronger pricing support, which is an important reason why Citi continues to be optimistic about the fundamentals of the NAND industry.

Industry supply is tight or may continue until 2028

Regarding future supply and demand trends, Micron's management expects the company's NAND supply growth rate to be lower than the overall supply growth rate of the industry in 2026. Looking ahead to 2027 and 2028, Micron expects the global NAND industry to grow at a mid-level of 20%, but even if the scale of supply continues to expand, the industry may still face limited supply in these two years.

This means that the tight supply and demand situation in the NAND market may not be a short-term phenomenon, but is expected to continue until 2028. Citi pointed out that although Micron's judgment on the future growth rate of industry shipments is higher than SanDisk's previously anticipated double-digit multi-year compound growth rate in the industry, the bank still maintains a positive view on the NAND market.

According to Citi, the key to determining the future of the industry is not only the rate of supply growth, but also whether demand can continue to absorb new production capacity. As AI data center requirements for storage capacity and data processing efficiency continue to increase, NAND demand is expected to receive long-term support.

Demand for AI data centers continues to grow, and SSD applications have become an important driving force

Citi believes that AI-driven data center construction is one of the important long-term factors supporting NAND demand. In particular, demand for solid-state drives (SSD) usage in AI inference processes is increasing. Among them, one notable application is the transfer of some key value cache (KV Cache) data from more expensive storage resources to more cost-effective SSDs.

KV Cache is a caching mechanism used by large language models to store previous calculation results during inference. It can reduce repeated computation and improve the efficiency of model processing requests.

As the scale of AI models expands and inference tasks increase, the use of cached data on storage resources may also continue to grow. By moving part of the cache data to an SSD, data centers have the opportunity to meet storage needs while reducing overall operating costs.

Citi believes that such applications are expected to drive data centers to continue to increase demand for NAND flash memory and bring more lasting growth momentum to the industry. Compared to traditional consumer electronics demand, investments related to AI data centers may also provide a new source of growth for NAND suppliers.

Citi maintains SanDisk's “buy” rating and is optimistic about long-term supply and demand fundamentals

Based on industry signals released by Micron's latest results, Citi continues to be optimistic about SanDisk's business prospects and maintains a target price of $2,100. Malik said that the demand for data centers driven by AI is continuous. In particular, the trend of using SSDs with more cost advantages to handle some KV Cache data will further support the fundamentals of supply and demand in the NAND industry.

At the same time, improved long-term demand visibility will also help strengthen the market's confidence in SanDisk's future business performance.

Citi specifically pointed out that although Micron's expectations for the industry's future growth in bitwise shipments are higher than SanDisk's previous judgment, the bank still maintains a positive view of SanDisk considering the continuity of AI demand and the business visibility brought about by long-term agreements.

Overall, Micron's NAND business revenue increased 42% month-on-month and prices rose by about 30% in the fourth fiscal quarter, further highlighting the current level of tight supply and demand in the storage market. In the context of the continuous expansion of AI data centers and the increasing number of SSD application scenarios, Citi believes that the NAND industry is expected to maintain a favorable supply and demand environment for the next few years, and SanDisk is also expected to benefit from this trend.