Memory semiconductor stocks have suffered a sharp selloff in recent weeks, but UBS analysts believe the downturn presents an attractive buying opportunity as artificial intelligence (AI) infrastructure continues to drive demand for advanced memory chips.
According to UBS, memory chip stocks have declined approximately 19% from their September highs, bringing valuations close to levels last seen in July. Despite the correction, the investment bank maintains a bullish outlook on the semiconductor memory sector, arguing that concerns over rising supply and intensifying competition may be exaggerated.
UBS highlighted compelling valuations across its memory stock coverage, projecting an average free cash flow yield of 29% between 2027 and 2030, excluding Chinese memory manufacturer ChangXin Memory Technologies (CXMT).
The bank identified Samsung Electronics as its top memory semiconductor stock pick, while maintaining buy ratings across all companies under its coverage.
Analysts pointed to strengthening demand for conventional server DRAM and solid-state drives (SSDs), which could help balance uncertainty surrounding high-bandwidth memory (HBM) used in AI processors.
Demand for server DDR5 memory is expected to remain robust through 2027 as technology companies expand AI inference infrastructure and data center capacity. Meanwhile, orders for Nvidia's SOCAMM memory modules have also increased, reflecting growing requirements for efficient memory solutions in AI computing systems.
UBS forecasts that HBM shipments will increase 49% year-over-year in 2027, supported by evolving memory configurations and continued investment in artificial intelligence hardware.
The bank also downplayed concerns about potential competition from China's CXMT. Although the company is reportedly exploring more advanced DRAM manufacturing technology, UBS expects near-term progress to focus primarily on research and sample production rather than significant commercial capacity expansion.
However, analysts identified Samsung's potential production expansion as a longer-term risk. The South Korean semiconductor giant could add more than 150,000 DRAM wafer starts per month in 2028, potentially increasing global memory supply.
UBS nevertheless expects any meaningful impact on the industry's supply-demand balance to emerge no earlier than late 2028.
Looking ahead, UBS believes the recent semiconductor stock correction could encourage memory manufacturers to increase shareholder returns through dividends and share buybacks.
With AI-driven memory demand remaining strong and valuations becoming increasingly attractive, UBS sees significant upside potential for Samsung Electronics and other leading memory chip manufacturers despite near-term market volatility.
