Global investment bank UBS expects a significant shift in the high-bandwidth memory (HBM) market next year, forecasting that Samsung Electronics will overtake SK Hynix as the world's largest HBM supplier. Despite the anticipated leadership change, UBS believes both companies will remain major beneficiaries of the accelerating artificial intelligence (AI) memory market.
In its first research report on SK Hynix's American Depositary Receipts (ADR), released on July 30 (local time), UBS initiated coverage with a Buy rating and a price target of $204, implying approximately 61% upside from the ADR's closing price of $149.
The report's most notable forecast concerns the competitive landscape of the HBM market.
UBS estimates that SK Hynix will retain the No. 1 position this year with a 48% share of HBM bit shipments. However, the bank expects Samsung Electronics to take the lead in 2027 with a 41% market share, followed by SK Hynix at 39% and Micron at 20%.
SK Hynix has dominated the HBM market in recent years, supported by its strong position in Nvidia's AI supply chain. UBS, however, believes Samsung will significantly expand shipments of next-generation HBM products and strengthen customer relationships, allowing it to reclaim the top position next year.
The investment bank emphasized that Samsung's expected rise does not signal weakening competitiveness at SK Hynix. Instead, it reflects the rapid expansion of the overall AI memory market, where growing demand is expected to support all major suppliers.
UBS forecasts global DRAM bit demand growth to accelerate from 22% this year to 36% in 2027, while NAND flash demand is expected to increase from 20% to 23% over the same period.
The report attributes the stronger outlook to the emergence of agentic AI, which requires significantly greater memory capacity than conventional generative AI applications. Demand is expected to extend beyond HBM to include DDR5, LPDDR5, and NAND flash products as AI workloads become increasingly complex.
UBS also expects AI infrastructure investment to keep the memory market in a supply-constrained environment through 2028, driven by steadily increasing memory capacity requirements for AI servers.
The bank remains positive on SK Hynix's business fundamentals despite recent share-price weakness.
According to UBS, the company has already secured 10 long-term supply agreements (LTAs) with major U.S. hyperscalers and leading original equipment manufacturers (OEMs). Negotiations are also underway for HBM supply contracts extending beyond 2027.
While these agreements could limit short-term average selling price (ASP) increases, UBS believes they will improve long-term earnings visibility, strengthen margins, and enhance free cash flow generation.
UBS argues that the market continues to undervalue SK Hynix's long-term earnings potential.
The firm's ADR has fallen roughly 35% from its July peak, and UBS believes current valuations still reflect historical industry profitability rather than the structural improvements brought about by the AI era.
The investment bank projects SK Hynix's average return on equity (ROE) to reach 40.2% between 2027 and 2031, significantly above the historical average used by the market in current valuations.
"Current valuations do not fully reflect the structural improvement in memory profitability or the company's stronger cash-generation capabilities," said UBS analyst Nicolas Gaudois. "Given the long-term growth trajectory of AI memory, SK Hynix continues to offer compelling investment value despite recent market volatility."
