The memory chip market continues to be hot! Bernstein: Prices of DRAM and NAND may rise by nearly 20% in the third quarter 2028 cycle or begin “normalization”

The Zhitong Finance App learned that Bernstein said in the latest global storage industry report that the current memory chip cycle is still booming, and the tight supply and demand for DRAM and NAND is expected to continue until 2027. The bank expects the average sales price of traditional DRAM and NAND to rise nearly 20% month-on-month in the third quarter of 2026, and is expected to continue to rise in the fourth quarter. However, as the long-term supply agreement (LTA) price cap gradually limits the room for further price increases, and new production capacity is released one after another, the current super boom cycle is expected to begin “normalizing” in 2028.

Meanwhile, Bernstein lowered expectations for HBM's price increase in 2027. The bank believes that some manufacturers are facing difficulties in supplying HBM4. The HBM3E to HBM4 switching speed may be slower than previously anticipated, and the SK Hynix (SKHY.US) HBM price assumption was lowered accordingly. At the same time, it is expected that Samsung will gain more HBM market share. Even so, the continued shortage of traditional DRAM will support the entire storage cycle to remain high.

In terms of individual stocks, Bernstein maintained the “outperforming market” ratings of Samsung, SK Hynix, Micron Technology (MU.US), and SanDisk (SNDK.US). Among them, the target prices for Samsung and Micron remained at 440,000 won and 1,300 US dollars respectively; SK Hynix's target price was lowered from 3.3 million won to 2.7 million won due to more conservative predictions on HBM's progress and pricing.

Prices of DRAM and NAND may rise by nearly 20% in the third quarter, and supply shortages will continue until 2027

Bernstein further raised short-term traditional storage price expectations. The report predicts that the average sales price of both traditional DRAM and NAND will rise by about 15% to 20% month-on-month in the third quarter of 2026. Among them, the DRAM price increase in the third quarter was higher than previously estimated by 12%. However, since the actual price performance in the second quarter was weaker than expected, the overall price level forecast for the third quarter did not change significantly compared to the previous one. The price forecast chart shows that both DRAM and NAND are in a very strong phase of price increases in the current cycle.

More importantly, Bernstein anticipates that significant supply shortages may continue until 2027. However, the room for memory chips to continue to rise sharply is narrowing. On the one hand, more and more long-term supply agreements have price caps; on the other hand, PC and smartphone customers have begun to reduce overall machine shipments, thereby reducing storage procurement requirements.

Bernstein expects that by the fourth quarter of 2026, the month-on-month increase in traditional storage prices will narrow to medium to high single digits; after entering 2027, prices are expected to rise only moderately under the price cap of long-term supply agreements.

HBM's price increase is expected to lower the HBM4 mass production schedule as a key variable

Compared to traditional DRAM and NAND, Bernstein is more cautious about HBM price trends. The bank lowered its forecast for HBM's price increase in 2027. One of the main reasons is that the HBM4 supply and mass production schedule are still difficult.

Bernstein said that the export tracking data stored in South Korea for July and August showed that Samsung's HBM production regions sent strong signals, while data from SK Hynix related production regions was relatively weak. Combined with recent information on HBM4 supply difficulties, the bank slightly delayed the timing assumption for the HBM3E to HBM4 conversion and lowered SK Hynix's HBM price forecast.

At the same time, Bernstein also predicted that even into 2027, the HBM3E will continue to be shipped on a considerable scale and will not be completely replaced by the HBM4 soon.

According to HBM's market share forecast, Bernstein continues to expect Samsung to increase its market share with better HBM4 performance and more production capacity. At the same time, the bank expects the average sales price of Samsung and Micron's comprehensive HBM to increase in 2027, but its judgment on the price increase of SK Hynix HBM3E and HBM4 is more conservative.

Nvidia's Rubin Ultra HBM configuration is expected to benefit from lowering traditional DRAM

Bernstein also adjusted the HBM demand forecast for Nvidia (NVDA.US)'s next-generation AI chip Rubin Ultra. The bank currently assumes that about half of the Rubin Ultra chips will be equipped with 8 layers of stacked HBM, and the other half will use 12 layers of stacked HBM, thereby lowering its average HBM capacity assumption from 1024GB to 640GB.

However, this does not mean that the overall storage supply and demand pattern will weaken significantly as a result.

Bernstein believes that reduced demand for HBM could free up some of the production capacity to produce more traditional server DRAM. Therefore, although the product portfolio between HBM and traditional DRAM will affect the revenue, profit, and market share of different vendors, the impact on the overall supply and demand of the industry is relatively limited because overall storage demand still exceeds supply. In other words, the production capacity released by assuming the decline in HBM demand may be absorbed by traditional server DRAM, and the overall shortage in the storage market will continue.

The 2028 cycle may begin to “normalize,” but the industry's profit margin is still higher than the historical peak

Bernstein still sees 2028 as an important turning point in how long the market is most concerned about how long the storage supercycle can last. The bank expects that as more new production capacity enters the market, the current severe supply shortage will begin to ease at that time. At the same time, after the scale of AI infrastructure investment continues to expand, it may also gradually face constraints in terms of financing costs, safety, environment, and employment.

Bernstein expects storage prices to begin “normalizing” in 2028, but this adjustment may be more moderate than previously anticipated. Notably, “normalization” does not mean that the industry's profitability will fall back to the level of the past cycle.

Bernstein predicts that the gross margin of the DRAM industry may peak at about 90% in the current cycle and then fall back to a high of 70% by the end of 2028; the NAND gross margin is expected to fall back to about 65%. Even so, both will still be above the peak levels of previous storage cycles. This means that Bernstein's forecast for 2028 is not a “cycle collapse” in the traditional sense, but is closer to gradually returning from extreme scarcity and high profit levels to a more sustainable state.

Long-term agreements lock in demand, storage giant shareholder returns are the next catalyst

As the current storage cycle continues for about a year, Bernstein believes that market profit expectations have basically caught up with industry fundamentals, and there is less room for significant profit improvement in the future. As a result, the key factors driving the next stage of storage stock performance may gradually shift from simple “price increases and profit revisions” to long-term supply agreements and shareholder returns.

The report shows that many storage vendors expect 50% or more of their revenue or production capacity to eventually be covered by long-term supply agreements, and many agreements already include price commitments. Take Micron as an example. As of June of this year, 16 long-term agreements have been signed, of which 14 have a total contract value of 100 billion US dollars at the lowest price; the minimum contract value of 8 agreements signed by SanDisk as of early August reached 93.9 billion US dollars.

Bernstein specifically emphasized that the next step is to pay attention to the financial guarantees behind these agreements, because the level of guarantee will directly affect the actual binding force of the contract. According to the report, the amount of financial guarantees related to Micron reached 22 billion US dollars, and SanDisk reached 16.5 billion US dollars.

Meanwhile, strong free cash flow is creating conditions for storage giants to expand shareholder returns. The report shows that many storage companies' capital return framework targets have reached about 50% or more of cumulative free cash flow.

Bernstein believes that as companies further clarify repurchases, dividends, and long-term supply agreement arrangements, investors' confidence in the sustainability of this round of profits is expected to increase, thus driving the storage stock valuation ratio to expand further.

After the latest forecast adjustments, Bernstein continued to give Samsung, SK Hynix, Micron, and SanDisk “outperform the market” ratings. Samsung's target price remains at 440,000 won, Micron's target price remains at 1,300 US dollars, and SanDisk's target price remains at 3,000 US dollars. Meanwhile, Bernstein lowered SK Hynix's target price from 3.3 million won to 2.7 million won due to lower HBM price predictions and more conservative HBM progress assumptions.