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Chip Shortages Loom: Memory Prices Soar Amid AI Demand
15 Oct
Summary
- Memory prices are surging due to data center and AI demand.
- PC and smartphone chip supply will decrease significantly next year.
- Cirrus Logic's growth is limited due to its Apple dependency.
KeyBanc Capital Markets analyst John Vinh downgraded Cirrus Logic to Sector Weight from Overweight following an extensive research trip across Asia. This trip revealed persistent shortages and price increases across the memory chip sector, largely driven by robust data center and artificial intelligence (AI) demand. Vinh anticipates significant price hikes, with DRAM expected to increase by 15% to 20% and NAND by 20% in the fourth quarter of 2026 compared to the previous quarter.
Memory suppliers are planning to redirect capacity towards high-demand data centers. This strategic shift is projected to decrease the available bit supply for personal computers and smartphones by 20% to 30% in the upcoming year. Vinh noted that major PC manufacturers like HP and Dell are extending their supply agreements through 2031, and Google is negotiating deals that could extend to 2035, suggesting a more prolonged upcycle for memory chips.
Analog chip trends are also exceeding expectations, supported by strong demand from industrial and data center sectors. This has led to extended lead times of approximately 26 weeks for many analog products, with some specific items requiring up to a year for delivery. Micron received particularly positive sentiment, and estimates were raised for analog chipmakers such as Analog Devices, Microchip, Texas Instruments, and NXP.
The downgrade for Cirrus Logic stems from its significant exposure to Apple, with approximately 80% of its revenue tied to the iPhone maker. Apple's recent reductions in wafer starts at TSMC, equivalent to 15 million to 20 million iPhones, suggest limited growth prospects for Cirrus Logic over the next six to twelve months. Furthermore, an anticipated PC diversification opportunity for Cirrus Logic has likely been postponed due to the current elevated memory prices.
