We have updated our core views on the storage sector: the fundamental industry upcycle continues, with the Q2 price increase trend already fully validated across the supply chain. The sector's subsequent investment narrative is formally transitioning from a broad-based rally to structural divergence. Market focus has shifted away from whether storage prices can achieve sequential increases, and is now concentrated on the absolute magnitude of the price uptrend, the duration of the high-price equilibrium, and the varying cost absorption capacities across different downstream end-markets. The divergence in demand strength between the consumer electronics and AI server segments has become the core variable driving the market outlook: (1) Consumer Electronics: End-demand pressure has intensified significantly, and the pace of future industry price increases is likely to gradually moderate. (2) AI-related Storage Demand: This remains the core driver of the full-year upcycle, with significantly greater price elasticity and sustainability compared to consumer electronics. Currently, major global Cloud Service Providers (CSPs) are collectively revising their capital expenditure upwards. The combined capital expenditure of the top four North American cloud providers for 2026 already exceeds $650 billion. Specifically, Google has significantly raised its guidance to $180-190 billion (previously $175-185 billion), Microsoft has increased to $190 billion (representing over 60% year-on-year growth), Amazon has maintained its $200 billion guidance, and Meta has raised its range to $125-145 billion (previously $115-135 billion). This clearly points to intensive investment in AI infrastructure. As long as the deployment intensity of global computing cluster capital expenditures does not see a significant downward revision, the robust upcycle for AI-related storage is unlikely to reverse quickly. This represents the core underlying shift driving the current strength in storage fundamentals and market performance.

At the segment level, HBM (High Bandwidth Memory) is the key source of potential upside for the next phase. According to TrendForce data, influenced by the rising shipment share of HBM3e and product mix optimization, the 2026 HBM Blended ASP is projected to be $1.74/GB, a slight year-on-year decrease of 3.5%. In a horizontal comparison, prices for various DDR and consumer-grade memory products (excluding HBM) have already reached relatively high levels after multiple previous rounds of increases, whereas the pricing benefits for HBM have not yet been fully realized. Samsung also explicitly stated during its Q1 2026 earnings call that the profitability of traditional DRAM currently surpasses that of HBM. According to TrendForce estimates, global HBM bit consumption in 2026 will surge 92% year-on-year to 28.5 billion Gb, with the expansion of AI computing clusters becoming the core demand driver. From a product structure perspective, TrendForce anticipates the HBM4 Blended ASP could remain around $2.05/GB, representing a significant premium of 28%-58% over HBM3e, highlighting the price resilience of higher-specification products. With the continued high growth in global AI server shipments in 2027, the accelerated iteration and penetration of HBM3e/HBM4, and ongoing supply constraints from advanced packaging and yield bottlenecks, we are optimistic about the future price increase expectations for HBM.

The recent strength in the storage market aligns closely with the logic of strong fundamentals. However, the short-term rally pace has been relatively rapid, warranting caution against potential interim consolidation and increased volatility. Concurrently, potential macroeconomic disturbances exist. The 10-year US Treasury yield has risen from 4.05% in early March to 4.42% in early May, coupled with persistently rising international oil prices, which may introduce lagged uncertainties for future global inflation and macroeconomic data.

Risk Warnings: AI capital expenditure falling short of expectations; memory manufacturers' capacity expansion pace exceeding expectations; macroeconomic disturbance risks such as rising US Treasury yields.