SK Securities said on the 19th that misconceptions about long-term supply agreements (LTAs) in the memory semiconductor market are needlessly amplifying concerns that the sector has already peaked.
In a research note published that day, analyst Han Dong-hee argued that "the essence of an LTA is not a contract that suppresses prices, but one that locks in supply," describing the arrangement as "a structure of mutual hostage-taking between customer and supplier."
Under an LTA, price bands — defined as NTE (not-to-exceed) and NTB (not-to-beat) thresholds — vary depending on committed volumes, contract duration, and advance payments. SK Securities estimates that LTAs account for roughly 40–50% of shipment volumes at both Samsung Electronics and SK Hynix, South Korea's two dominant memory chipmakers. The remainder is split between AI server customers and traditional end-market buyers.
The brokerage expects that once LTAs become more formalised, prices in the non-LTA spot market will actually strengthen. Because suppliers treat LTA fulfilment as the top priority in allocating production capacity, the residual supply available to non-LTA buyers contracts accordingly.
SK Securities also reframed recent reports that CoreWeave has been negotiating put options to hedge against a fall in memory prices. Rather than reading this as a bearish signal for the sector, the analyst characterised it as evidence of how binding LTAs have become. "An LTA itself gives the buyer a call-option-like structure," Han wrote. "Setting up a put option is not a bet on lower prices — it is a hedge against an existing position."
The note also marks a shift in how the brokerage thinks investors should value memory stocks. In previous cycles, share price momentum was the primary investment criterion. In the AI era, SK Securities argues, the appropriate framework will migrate towards price-to-earnings (P/E) valuation anchored in trough earnings per share, profit durability, and earnings visibility.
Pointing to simultaneous rises in memory spot prices, memory price premiums, and GPU rental rates, SK Securities concluded that the foundations for continued memory price strength remain intact. The brokerage reiterated its buy-on-weakness stance and overweight recommendation on the memory semiconductor sector.