AI NAND chip market seen growing to $29 bn by 2029, Morgan Stanley says

Morgan Stanley analysts report a significant resurgence in the NAND flash memory market, previously considered less relevant for AI, now driven by accelerating demand for AI inference and infrastructure deployment. Quad-Level Cell SSDs are emerging as the optimal high-capacity, cost-effective solution for AI models, with AI NAND chips projected to account for 34% of global NAND sales and add $29 billion to the total addressable market by 2029. This accelerated demand, fueled by large orders from cloud providers, could lead to a NAND chip shortage by mid-2025, positioning SanDisk, Samsung Electronics, and Kioxia as key beneficiaries of this secular growth cycle.

Analysis

The NAND flash memory market, previously considered a secondary player in the artificial intelligence boom, is now identified as entering a significant growth phase driven by AI inference demand. According to a Morgan Stanley research note, Quad-Level Cell (QLC) SSDs are emerging as the optimal solution for AI model storage and fine-tuning due to their high capacity and cost-effectiveness, surpassing traditional hard disk drives. This shift is projected to add $29 billion to the NAND total addressable market, with AI-related demand expected to account for 34% of global NAND sales by 2029. Forward-looking indicators are strong, as cloud service providers are reportedly in discussions for large-scale orders for 2026. This accelerating demand cycle is forecast to create a potential NAND chip shortage by the second half of 2025, positioning key suppliers such as SanDisk (SNDK), Samsung Electronics, and Kioxia as the primary beneficiaries of what is described as a new secular growth cycle.

Key Decisions for Investors

• Investors should consider increasing exposure to the identified beneficiaries of this secular trend, particularly NAND suppliers like SanDisk (SNDK), Samsung Electronics, and Kioxia, which are poised to capture a significant portion of the expanding AI-driven market.
• Monitor NAND pricing, supplier capital expenditure plans, and earnings reports closely over the next 12-18 months, as the forecasted chip shortage by mid-2025 could lead to significant margin expansion and upward earnings revisions for producers.
• Assess the second-order effects on cloud service providers and AI infrastructure companies, as a tightening NAND supply and potential price hikes could introduce cost pressures and impact their infrastructure deployment timelines.