J.P. Morgan: Memory chip supply remains tight, while consumer demand and share prices face pressure

Why do DRAM and HBM continue to exceed expectations?

In the third quarter of 2026, the industry average selling price for DRAM rose 23% quarter on quarter, above JPMorgan’s previous forecast of a high-teens increase to 20%; manufacturers also guided for double-digit quarter-on-quarter growth in fourth-quarter bit shipments.
HBM4 shipments have begun, and manufacturers expect its bit shipments and revenue to exceed those of the previous-generation HBM3E between the third and fourth quarters. As pricing negotiations progress, manufacturers expect the profitability gap between HBM and conventional DRAM to narrow heading into 2027.
JPMorgan expects the average selling price of HBM to rise 96% in 2027. The bank believes that although price increases risk suppressing demand, negotiations are currently proceeding smoothly, indicating that end customers can generally absorb them.

JPMorgan acknowledges that NAND price increases are slowing but sees no near-term signs of price cuts or a downturn. KIOXIA’s fourth-quarter 2026 guidance was weak, which the bank attributed to some demand being pulled forward into the third quarter and some being deferred to the first quarter of the following year.
The bank believes demand for enterprise solid-state drives used to offload AI model KV caches is still growing, and that cloud providers have an incentive to optimize models using lower-cost NAND solutions. Its research indicates that Chinese NAND manufacturers are primarily focused on consumer applications and pose a limited threat to demand for international enterprise solid-state drives.
Expectations for supply growth differ: Micron expects industry NAND bit growth to reach around 25% in 2027, while SK hynix expects growth in the high teens. JPMorgan believes the difference stems mainly from the timing of capacity ramp-ups.

Cloud providers are increasing AI investment, prompting memory manufacturers to prioritize server products. JPMorgan estimates that server DRAM and HBM combined will rise from more than 50% of DRAM sales in 2025 to more than 60% in 2026, and exceed 70% in 2027.
The shift of resources to servers is also constraining supply for mobile phones and PCs. Apple said memory shortages limited Mac and iPad supply and expects memory costs to put greater pressure on gross margin in the fourth quarter of 2026; Intel expects the PC slowdown to last at least through the first half of 2027.
JPMorgan believes server demand is sufficient to offset weak consumer-segment profitability, while noting that demand concentration risk warrants attention.

JPMorgan said memory manufacturers all included 2027 in long-term supply agreements and broadened their customer base during third-quarter earnings communications, with some contracts extending beyond 2030. Manufacturers generally guided for long-term agreements to cover at least 50% of their business in 2027–2028.
The bank judges that the industry’s supply-demand gap is unlikely to narrow substantially in the near term and that long-term agreements and prepayments can cushion profitability, making cuts to earnings-per-share forecasts over the next six months less likely.

As of the report, memory stocks had fallen about 45% from their recent 2026 highs, while the Philadelphia Semiconductor Index had fallen 29% over the same period. Investors are concerned that AI financing and commercialization, as well as power bottlenecks, could cause the memory cycle to weaken sooner than expected.
JPMorgan expects memory prices to remain high in 2027, but a lack of near-term catalysts could leave shares trading in a range in the short term. The bank remains positive on the sector over the medium term and ranks SK hynix, Samsung Electronics and KIOXIA in that order by potential upside from shareholder-return policies over the next three months; all three are rated Overweight.