Morgan Stanley Shifts Memory Chip Investment Logic: DRAM Over NAND, Chipmakers Over Modular Firms

According to Morgan Stanley's July 2 report, NAND flash demand is projected to grow 60% annually through 2027, driven by AI applications, which will account for 41% of total NAND market by 2027—up from 18% in 2025. However, the bank expects a 15% supply shortage in 2026, signaling structural market differentiation replacing blanket price appreciation.

Morgan Stanley recommends prioritizing DRAM investments over NAND, citing superior supply discipline through long-term agreements (LTAs), stronger demand visibility from AI servers, and production constraints from extreme ultraviolet lithography. For NAND, the bank favors chipmakers over modular manufacturers, citing superior pricing power and supply control, as modular firms face margin pressure from depleting low-cost inventory and competitive pressures from cloud service providers sourcing directly from original equipment manufacturers.