Memory prices to surge 50% next quarter, says Jefferies

The investment firm forecasts memory prices will increase by 40% to 50% in the third quarter of 2026 compared with the previous quarter, followed by another 30% to 40% rise in the fourth quarter. Price increases are expected to continue into 2027, with average prices projected to climb 40% to 45% year over year as manufacturers add little to no new wafer production capacity.

Jefferies said the expected supply shortage stems from slow production growth outside China, with most output gains coming from improvements in manufacturing processes rather than new fabrication capacity. The firm believes this imbalance will keep the market tight through 2027.

Cloud service providers are expected to play a major role in tightening supply. According to Jefferies, they have already secured about half of total memory production capacity through two-year long-term agreements that require a 40% upfront payment. That share could rise to 70%.

The report noted that consumer electronics manufacturers have not signed similar agreements, leaving them more exposed to rising prices and potential supply shortages as cloud companies continue to reserve production capacity.

The outlook also highlights differences across memory products. Server DRAM, widely used in artificial intelligence infrastructure and data centers, is expected to see stronger price growth than the broader market because of sustained demand. High Bandwidth Memory (HBM), a key component for AI accelerators, is also expected to remain in short supply, although expanding production capacity could limit price increases to around 70% over the next 12 months.

Jefferies expects the market to remain favorable for memory makers until at least 2027. However, it warned that prices could decline sharply in 2028 if global wafer capacity expands by 15% to 20% while demand, particularly from AI applications, begins to slow.

The report also argues that China is unlikely to disrupt the current market cycle over the next two years because of a widening technology gap with leading global manufacturers. Chinese DRAM producer CXMT is estimated to be one and a half to two generations behind industry leaders and lacks access to extreme ultraviolet lithography, limiting its ability to produce next generation memory technologies such as DDR6 and HBM3E.

While China's expanding production is expected to affect mainly lower end memory products in the near term, Jefferies said its NAND flash technology could become globally competitive by 2028.

The report also pointed to improving prospects for Samsung in the next generation HBM4 market. As the industry shifts to hybrid bonding technology, Jefferies believes Samsung could overcome its previous technological disadvantage, with its 4 nanometer HBM4 base die expected to deliver leading performance.

Earlier, Qazinform News Agency reported that Donald Trump announced the Apple-Intel partnership for U.S. based chip production.