022What happens to memory prices if AI capex stops growing in 2028?

Where prices stand

Conventional DRAM contract prices rose about sixfold from the third quarter of 2025 to the fourth quarter of 2026, chaining TrendForce’s quarterly estimates. NAND rose about 3.6 times over 2026. DDR4 8Gb, the old PC part, went from $1.35 in early 2025 to $27.50 in October, twenty times. The makers are earning margins memory has never seen: SK hynix an 80% operating margin in the third quarter, Micron an 87% gross margin, SanDisk 85%.

2027 is sold. SK hynix says its 2027 volumes and prices are final and its DRAM and HBM are effectively sold out through 2029, with long-term agreements covering more than half of its 2027–28 capacity. Samsung says its 2027 HBM is sold out, and Micron has agreed the vast majority of its 2027 HBM. The open question is 2028, and it hangs on AI capex: counting HBM at the wafer it takes, we estimate the HBM and CPU memory in AI accelerator servers is about 30% of DRAM demand in 2026 and 37% in 2028 (pack 012, which also counted CPU servers bought for agents, put 2027 near 43%). Counterpoint has servers of every kind at 48% of 2026 DRAM shipments, and HBM at another 9%.

The rises are slowing, and spot has stopped pulling contract up. DRAM spot has barely moved since early October and sits about 70% above October’s DDR4 contract price. NAND wafer spot fell 14% in the four weeks to November 2 as Chinese phone brands cut prices, and October’s MLC contract price was flat, ending a 21-month rise. Buyers are cutting back: IDC expects smartphone shipments to fall 16.7% this year and PCs 11.3%, and SK hynix says some customers are reviewing the timing of their projects.

The capex paths

Plan. Pack 010 has worldwide AI capex rising from about $1.0T in 2026 to $1.40T in 2027 and $1.65T in 2028, up 18%. The Street has a little less growth in 2028: Morgan Stanley has hyperscalers and AI cloud providers up about 14%, to $1.8T, and Goldman has the large US hyperscalers at about $1.4T, some $100B above consensus. S&P Global’s models generally assume capex flattens in 2028, and Counterpoint’s memory analyst Kang Kyung-soo has Big Tech’s capex growth approaching zero.

Flat 2028. 2028 spends what 2027 planned to, $1.40T, and growth resumes at the plan’s rates in 2029.

Blue wave. Pack 020 has Texas switching on 2.4 GW less data center load by the end of 2027 than on the path Gov. Greg Abbott had set, and 3.8 GW less by the end of 2028, with Gina Hinojosa as governor, Vikki Goodwin as lieutenant governor and a moratorium until new laws take effect in September 2027. At pack 021’s $50B a gigawatt, three-quarters of it leaving the year the switch-on moves, that takes $89B of AI capex out of 2027 and another $53B out of 2028, about 6% and 3% of plan. It counts every builder in Texas, not just the Big Four.

Flat 2028 with the blue wave, our headline: $1.31T in 2027 and $1.35T in 2028, 18% below plan.

Why 2028 takes the hit

Memory is bought before the chips ship. Pack 012’s model has about 35% of a year’s HBM bought the year before, as stacks move through CoWoS packaging, boards and buffers. 2027’s HBM is contracted and largely take-or-pay, so in the headline case it is bought on plan anyway, including the stacks meant for 2028’s chips; whatever 2027 buys beyond what the flat path needs, about 0.8 EB, is used up before 2028 orders anything new. Server orders placed late in 2027 for 2028’s builds go the same way. So 2028’s purchases fall harder than 2028’s capex: HBM bought in 2028 is 27% below plan, host DRAM in AI servers 23% and AI storage 23%, against 18% less capex.

Buyers hold stock they bought in the shortage. Korea Invest Insights estimates customers built 2–9 weeks of DRAM stock in 2026 and that restocking makes up 8–13% of 2027 DRAM shipments. When prices turn, that stock gets used instead of bought. We assume 3 weeks of demand comes out of 2028 orders.

Supply is already ordered. Micron expects industry DRAM bits to grow in the low 20s % in both 2027 and 2028, and NAND in the mid-20s %. SK hynix’s Yongin fab 1 opens its first cleanroom in February 2027; Samsung’s P5 takes tools from mid-2027 for mass production late in 2028; Micron’s Idaho fab ships from mid-2027, with a second Idaho fab and Japan late in 2028; CXMT goes from about 350,000 wafer starts a month at the end of 2026 to 500,000 by the end of 2028.

How far prices fall: 2019 is the test

We have run this experiment before. Hyperscale capex rose 43% in 2018 and grew only modestly in 2019 (Synergy). In December 2018 Micron said customers had built higher-than-normal inventories, which it expected them to work down by the second half of 2019, and cut its capex plan by $1.25B. Contract prices fell nearly 30% in the first quarter of 2019 alone, and an 8 GB PC module went from $68 in the third quarter of 2018 to $25.50 by July 2019 (TrendForce). DRAM revenue fell 37.5% in 2019 (Gartner) while bit shipments kept growing, so the price per bit fell by around half.

Some of that was expected. In October and November 2018 TrendForce had 2019 bit output up about 22% and prices down 15–20%. Prices ended about a third below that path. The surprise was mostly stock: in January North American data centers held 5–6 weeks of server memory, about twice normal, and by March server and PC customers held more than seven weeks (TrendForce).

The 2022–23 downturn was slower but deeper: DRAM fell about 57% and NAND 55% from the third quarter of 2021 to the 2023 trough (Yole), as consumer demand fell first and cloud buyers cut last. Makers cut capex and wafer starts four to six quarters into the slide: SK hynix halved its 2023 capex, and Samsung cut output from April 2023. Contract prices bottomed that third quarter and rose in the fourth (TrendForce).

Our model fits how far demand bends to price to 2019’s surprise, not to the whole fall. About three weeks of excess stock and demand growth a few points short of what was expected, 8.6% of a year’s bits, with makers holding back 30% of it, clears 35% below the expected path. Then it adds what is new this time: HBM that vendors can put back on chips, AI budgets that buy more when memory is cheaper, and makers who say they will pace new tools to demand. A flat 2028 is the bigger shock: 13.7% of 2028’s DRAM demand goes missing against plan.

Reading the paths

On plan, 2028 is a mild correction. DRAM peaks in the second quarter of 2027 and gives back 3% in the second half, as Citi expects, then drifts lower in 2028 as new fabs arrive; Bernstein expects 2028 to normalize, more mildly than it first thought. NAND peaks earlier: TrendForce has supply catching up from the second half of 2027. Annual averages: DRAM −9% and NAND −14% in 2028.

Flat 2028 is 2019 and then some. On its own it takes DRAM 46% below 2027 and NAND 44%. The blue wave adds to 2028’s fall and takes some of 2027’s rise away: HBM is contracted, but much conventional DRAM and NAND is still priced month to month or quarter to quarter, so 2027 averages 3% below plan for DRAM and 7% for NAND. On its own, with 2028 capex still growing, the blue wave leaves 2028 DRAM 14% below plan. We count every dollar of Texas capex that leaves 2027 as hardware nobody buys that year. Alphabet and Microsoft say demand exceeds what they can supply (pack 021), so some of those chips would go elsewhere; if all of them did, the headline would be −48% instead of −50%.

HBM falls less. HBM and DDR5 come off the same wafers, and an HBM bit takes about three times the wafer of a DDR5 bit. When AI buys less HBM, makers move the spare wafers back to DDR5, so conventional DRAM takes most of the fall. 2028’s HBM deals are struck in the second half of 2027, before 2028 budgets are final, so we pass half of the pool’s move through to them: $20.1 per GB, against $30.8 in 2027. If all of it comes through, $14.6, about 2026’s price.

Revenue falls back toward 2026’s level. $1.48T in 2027 becomes $0.95T in 2028, against $0.89T in 2026. The makers stay very profitable: the 2028 DRAM price in the headline case is still about 3.1 times its mid-2025 level.

2029 is mostly about the makers. If they cut 2029 supply as hard as they did in 2023, holding back 60% of the shortfall, prices recover much of the way to plan in 2029; if they don’t, they stay down. The 2029 figures are in the data under the chart; treat them loosely.

Where we sit against the forecasters

Counterpoint’s Kang, the one forecaster we found who ties 2028 to capex, expects prices to hold through 2027 and fall in 2028 as capex growth approaches zero, and put declines of 20–30% on the table. Bernstein’s July note had SK hynix’s DRAM price peaking at the end of 2027 and falling about 53% in 2028; in September it said 2028’s normalization would be milder than it had expected. Our headline is near Bernstein’s July case. It falls further than Counterpoint’s for three reasons: 2027’s contracted HBM that 2028 must work through, the stock buyers built in the shortage, and supply that grows about a fifth in 2028 because the tools are already ordered. If makers hold back 60% of the shortfall instead of 30%, we get −35%: closer to Counterpoint, though still a deeper fall.

What would soften it

• Discipline. Samsung says a large share of its 2027 capex increase goes to space and cleanrooms, with equipment adjusted flexibly to demand; SK hynix says Yongin’s cleanrooms open in phases based on demand. Tools deferred in late 2027 come straight out of 2028’s bits.
• HBM going back on chips. Vendors cut memory per package because HBM was short and dear, and chipmakers are reportedly evaluating 8-Hi stacks for Rubin Ultra and next year’s custom chips (TrendForce). Pack 012’s announced specs need about 45% more HBM in 2028 than the trimmed ones. Cheap HBM gets put back, if 2028 parts can take taller stacks in time.
• Phones and PCs. IDC has smartphone shipments down 16.7% this year, with DRAM and NAND costs up more than 300%, and TrendForce expected low-end phones to go back to 4 GB base models in 2026. Lower prices bring back both units and memory per device, with a lag of a product cycle.
• Flat dollars, more chips. Memory is about 30% of hyperscaler spending this year (SemiAnalysis); on plan we have DRAM at 21% of 2028’s AI capex and NAND at 9%. With budgets fixed in dollars, cheaper memory buys more servers. At half strength, that brings back about 4% of AI DRAM demand in 2028.
• Floors. Three-quarters of the revenue in Micron’s strategic agreements has a defined pricing framework, most of it with floor and ceiling prices, and SanDisk’s agreements carry $93.9B of minimum revenue at floor prices. They protect makers’ revenue, not market prices.

What would make it worse

• China. CXMT adds about 150,000 wafer starts a month between the end of 2026 and the end of 2028, and Citi names Chinese capacity as the main risk to its call.
• Contracts that push the shortfall onto the open market. If buyers must take contracted volumes, the whole shortfall lands on what is left: contract and spot prices fall further, even as the makers’ own average price holds up.
• More stock than we assume. Six weeks of destocking instead of three takes the headline to −60%.
• A harder Texas. Pack 021’s stress case, with the Texas House flipped and a moratorium to the end of 2027, gives −58%.

What to watch

Spot against contract. Spot usually turns first: in October 2018, as 2019’s slide began, DDR4 spot was already below contract ($6.95 against $7.31, TrendForce). Today DRAM spot is flat at about 70% above contract, and NAND wafer spot is falling.

Late January and early February 2027. Fourth-quarter results bring the first 2027 capex guides from Alphabet and Meta and Amazon’s “meaningfully more.” Any 2028 color, and whether capex keeps outrunning operating cash flow, matters more for memory than any governor.

TrendForce’s first-quarter 2027 contract outlook, due around the turn of the year. A rise under 5% for DRAM would fit the peak-in-2027 camp.

Mid-2027: tool-in at Yongin and P5, and 2028 HBM negotiations. 2027’s deals closed in September and October; where 2028’s land, and whether buyers hold back, is the first hard read on 2028.

Inventory. Micron’s inventory days rose by 9 last quarter to 129. Rising supplier inventory alongside falling spot is how 2019 began.