Memory Chip Supply Crisis: A Historic Shortage on the Horizon
TREE NEWS reports: South Korean brokerage KB Securities has issued a stark warning: Samsung Electronics and SK Hynix, the world’s two largest memory chip makers, have seen their storage chip inventories dwindle to less than 10 days’ worth of supply. In a research note dated September 7, KB Securities analyst Kim Dong-won projects that next year’s bit demand for DRAM and NAND will outpace supply by more than 10 percentage points, potentially leading to a complete depletion of sellable inventory. Kim describes this as a ‘historic shortage’ that could reshape the semiconductor landscape.
AI Investment Surge Drives Unprecedented Demand
The root cause lies in the explosive growth of AI infrastructure spending. KB Securities notes that hyperscale cloud providers are dramatically increasing their AI capital expenditures, with next year’s investments expected to reach $1.3 trillion, up roughly 60% from this year. Kim points out that AI is now generating direct revenue streams through cloud AI services, token-based billing, agentic AI, and model hosting, making AI monetization a concrete reality.
Memory chips are capturing an ever-larger share of this investment. KB Securities estimates that memory’s share of AI infrastructure spending will jump from 14% in 2024 to 40% in 2025, and further to 57% by 2026—a fourfold increase in just two years. TrendForce, a global semiconductor research firm, projects an even more aggressive trajectory, forecasting 68% by 2026. This surge is driven by three factors: higher memory capacity in HBM4 (the sixth-generation high-bandwidth memory), increased DRAM demand in CPU servers, and a parallel expansion in enterprise-grade SSDs for inference workloads.
HBM4 Production Squeezes General DRAM Supply
KB Securities highlights a structural constraint: producing one HBM4 wafer consumes the same capacity as three general DRAM wafers. This means every incremental gain in HBM4 output reduces available capacity for standard DRAM by a threefold ratio. With total wafer input limited, this trade-off directly restricts the bit growth available for the open market, forming a core driver of next year’s supply shortage. Kim predicts that both DRAM and NAND bit demand will exceed supply by over 10 percentage points, culminating in what he calls ‘the most severe supply tightness in history.’
Inventory Levels Critical: Samsung and SK Hynix Face Stock-Out Risk
As of the third quarter, Samsung and SK Hynix’s memory inventory has fallen below 10 days—a situation that transcends simple demand recovery. The physical inventory available for sale is facing an absolute shortage. Kim warns that the possibility of running out of sellable memory products next year is becoming a reality. AI servers will simultaneously absorb HBM, server DDR5, and enterprise eSSD demand, with multi-category demand resonance further straining supply. Under these conditions, memory chip prices have significant upside potential.
Stock Prices Plunge, Creating ‘Extreme Undervaluation’
Despite the bullish fundamentals, Samsung and SK Hynix shares have dropped 38% from their three-month highs, leaving their forward price-to-earnings ratios at just around 3 times next year’s earnings. KB Securities argues this valuation severely diverges from expectations that both companies will post record profits for the next three years while maintaining substantial shareholder returns. The firm labels this an ‘extreme undervaluation’ and has named both companies as top picks in the semiconductor sector, anticipating a powerful re-rating rally.
Key Takeaways for Investors
- Supply shortage is real: With inventories below 10 days and demand exceeding supply by 10% next year, memory prices are set to rise sharply, benefiting Samsung and SK Hynix.
- AI is the structural driver: The AI infrastructure boom is not a bubble; it’s translating into concrete revenue, with memory chips taking a larger share of spending.
- Valuation gap: A 38% correction has left these stocks at historically low P/E ratios, presenting a potential entry point for long-term investors.
- Risks: Watch for any slowdown in AI capex, geopolitical tensions affecting supply chains, or unexpected shifts in memory demand.
