Investors Are Becoming More Cautious Is the Storage Boom Showing the First Signs of Slowing Down?

Related Vendors

Taiwan Machine Tool & Accessory Builders' Association (TMBA)

SIMTOS (Seoul International Machine Tool Show)

Memory prices remain high, and DRAM and NAND manufacturers continue to benefit from AI and tight supply. However, analysts warn that lower stock valuations, sluggish trading, and falling spot prices—particularly for NAND—point to growing skepticism among investors.

The global memory market continues to be driven by strong demand for products used in AI data centers. HBM and server DRAM, in particular, remain in short supply, and some industry analysts expect shortages to persist through 2027. Contract prices are also expected to rise further in the fourth quarter, albeit at a slower pace than before.

At the same time, there are growing signs that investors are taking a more cautious view of how long the current memory boom will last. “Valuations of memory stocks have fallen further,” reports the Wall Street Journal, among others, citing a related statement from Bank of America. For example, Micron is currently trading at about seven times its expected earnings. Although this is still considerable, the corresponding multiple had been around twelve as recently as June. Expectations have shifted accordingly for other major memory manufacturers as well: For SK Hynix, for example, the multiple fell from eight times to just about four times. Such declining valuations are typically observed in the memory industry toward the end of an upswing cycle.

Investors Doubt that the Cycle Has Changed Permanently

Manufacturers, however, argue that long-term supply contracts could mitigate the traditionally sharp fluctuations in the memory market in the future. A growing portion of production is already tied up through such agreements. Micron, for example, stated in June that it intended to generate at least half of its revenue through such contracts in the long term.

However, this has not yet allayed concerns on the capital markets about another downturn. Additional production capacity at Micron and SK Hynix, as well as expansions by Chinese manufacturers such as YMTC and CXMT, could certainly increase supply in the coming years: In previous memory cycles, rising capacity regularly led to falling prices and margins as soon as demand could no longer keep pace with production growth.

However, there are no signs yet of a general price collapse in the fourth quarter. TrendForce continues to expect NAND contract prices to rise by 15 to 20 percent; DRAM prices are also expected to increase. Although the projected increases are lower than at earlier points in the current cycle, they still point to a tight contract market for the time being.

The Spot Market Is Showing More Caution

By contrast, the short-term spot market is showing a much more subdued trend. The average spot price for DDR4 chips with 1Gx8 and 3200 MT/s rose by only 0.93 percent between September 23 and 29, from $45.89 to $46.32. At the same time, trading remained weak; according to industry analysts at TrendForce, buyers acted cautiously, and prices mostly fluctuated within a narrow range.

The market is even more subdued for NAND flash. Demand from the consumer sector has not yet shown any noticeable signs of recovery. Suppliers are responding with more flexible pricing, while buyers are largely adopting a wait-and-see approach. On September 28, the average spot prices for 512-Gbit TLC wafers fell by 2.45 percent over the course of a week to $19.396.

As a result, the memory market is becoming increasingly mixed. While AI data centers, HBM, and server memory are driving high utilization rates and rising contract prices, consumer NAND and parts of the spot market are showing significantly weaker demand. The falling NAND spot prices therefore do not directly contradict the expected higher contract prices, but they do send a counter-signal to the market’s overall strength. A key factor in future developments will likely be whether AI demand remains strong enough to permanently offset additional production capacity and weaker segments.