Memory chip prices surge 60% in Q2 as AI demand fuels record rally

DRAM and NAND contract prices are set to rise about 60% quarter-over-quarter in Q2 2026, exceeding prior forecasts, as AI server demand absorbs all available supply from the world's largest memory makers.

"The upcycle is stronger than we modeled three months ago, driven by sustained AI server procurement and limited wafer capacity," Mark Li, analyst at Bernstein, said in a June 2 report.

DRAM contract prices rose 64% QoQ on a weighted-average basis, with mobile DRAM surging 80% and consumer DRAM climbing 85%. NAND prices rose roughly 60%, supported by mobile NAND and SSD pricing. DDR4 chip prices jumped 19% to 25% month-over-month in May alone.

The price surge has pushed Micron Technology's market capitalization above $1 trillion for the first time, while SK Hynix also joined the trillion-dollar club. Bernstein maintains outperform ratings on Samsung Electronics, SK Hynix, Micron and SanDisk, but warns that consumer demand destruction could slow price growth in the second half.

Server demand absorbs all incremental supply

Server DRAM remains the tightest segment. Suppliers have shifted capacity from other applications to server DRAM, and delays in HBM4 mass production have freed some wafer capacity — but every additional bit has been absorbed by hyperscaler demand. US cloud service providers including Amazon Web Services and Microsoft Azure have largely completed long-term agreement negotiations with memory vendors, securing priority allocation. Chinese cloud providers remain in active negotiations and are expected to receive less favorable terms.

Mobile DRAM saw the steepest price increases, with Samsung and Micron demanding 80%-plus QoQ increases from smartphone OEMs. SK Hynix's initial quotes were more moderate at 55% to 60%. But after two quarters of aggressive price hikes, smartphone makers are cutting production. TrendForce expects 2026 smartphone shipments to decline 16%, and mobile DRAM price growth is expected to slow to 0% to 10% per quarter in the second half.

NAND wafer spot prices rose just 1% to 2% month-over-month in May, a sharp deceleration from prior months, as module makers grew cautious about purchasing at elevated levels. Spot prices remain about 20% below contract prices, suggesting limited upside for further contract increases. PC DRAM Q3 price growth is forecast at 8% to 13% QoQ, down sharply from the 46% increase in Q2.

Valuation disconnect emerges despite record prices

Despite the rally, memory stocks trade at discounts to the broader market. Micron trades at 17 times forward earnings, SanDisk at 27 times and Western Digital at 31 times, compared with the S&P 500's multiple of 23. UBS raised its Micron price target to $1,625 from $535, implying a potential market capitalization of $1.8 trillion within 12 months. Barclays doubled its SanDisk target to $2,300.

The Roundhill Memory ETF, which holds the major memory stocks, has seen its assets under management surge to $15 billion since its April launch, reflecting investor appetite for memory exposure. Micron's revenue is expected to reach $110 billion this fiscal year and $175 billion next year, while SanDisk's revenue is projected to grow 165% to $20 billion.

Bernstein expects memory prices to peak in the second half of 2027 and begin normalizing in calendar 2028 as new capacity comes online. The key risk is an earlier-than-expected shift from undersupply to oversupply as manufacturers ramp production to capitalize on elevated prices — a pattern that has historically ended every memory upcycle. For investors, the question is whether the current valuation discount adequately compensates for the cyclical risk that has always defined this industry.

This article is for informational purposes only and does not constitute investment advice.