Why This Memory Chip Boom May Have More Staying Power Than History Suggests

Memory chip booms rarely last. High memory prices encourage manufacturers to add capacity, which eventually creates too much supply and pushes prices lower.

But today's artificial intelligence (AI)-driven demand for memory could prolong this cycle. Memory manufacturers are struggling to increase production fast enough to keep up with demand.

Image source: Getty Images.

Growing HBM demand

High bandwidth memory (HBM) is essential for AI accelerators, but its production also affects the supply of conventional DRAM. TrendForce estimates HBM could use about 30% of the DRAM production capacity of the three largest memory makers in 2027, while accounting for only 13% of the memory bits they produce. Hence, there is less manufacturing capacity left for conventional memory, just as AI servers are also requiring more server DRAM.

TrendForce expects new factories and more advanced manufacturing processes to increase DRAM bit supply by about 24% in 2027. But this new supply may not be enough to meet demand, as HBM takes up more production capacity and new equipment takes time to arrive.

Memory boom extends beyond Micron

The financial results across the industry's three dominant memory producers show just how powerful the ongoing memory cycle is.

Micron Technology's (NASDAQ: MU) revenue jumped around 346% year over year to $41.5 billion, while its non-GAAP gross margin reached 84.9% in the third quarter of fiscal 2026 (ending May 28, 2026).

SK Hynix's (NASDAQ: SKHY) revenue also soared 257% year over year while operating profit was up 557% year over year in the second quarter of fiscal 2026 (ending June 30, 2026). Samsung (OTC: SSNLF) remained the world's largest server DRAM supplier in the first quarter of 2026, with a 38.5% market share, followed by SK Hynix at 28.8% and Micron at 22.4%.

There is another sign of how tight the memory market has become. TrendForce found that conventional server DRAM has been more profitable to produce than HBM since the first quarter of 2026. This is partly because DRAM prices have risen much faster, while HBM prices were locked into longer-term contracts. Hence, the AI boom is no longer benefiting only HBM. The resulting tight capacity is also supporting prices and profits across the broader DRAM market.

Increasing memory capacity

Not surprisingly, Samsung, SK Hynix, and Micron are all expanding their manufacturing capacity. SK Hynix recently approved $38.3 billion of investment in new chip manufacturing facilities in South Korea, including capacity for HBM and other advanced DRAM products. Micron is also expanding its DRAM manufacturing capacity in the U.S.

According to Reuters, China-based ChangXin Memory Technologies is the world's fourth-largest DRAM maker. The company also reportedly plans to more than double its production capacity from about 300,000 wafers per month to over 600,000.

But it takes time for the new supply to come online. According to TrendForce, long equipment lead times and the shift of capacity toward HBM are keeping DRAM supply growth behind demand. This delay could prolong the memory boom, even as manufacturers expand production.

But that does not mean the boom will last forever. TrendForce expects NAND supply to loosen in the second half of 2027, while DRAM capacity could remain tight in 2027.

Hence, for investors, the key signal will be when DRAM supply growth finally outpaces demand. Until then, the current memory boom could have more room to run.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.