AI Is Buying Up the Memory Supply. Everyone Else Is Paying More for Less.

Our view in one paragraph

Memory chips used to be sold to whoever paid the going price. That is no longer how it works. The big makers now sell most of their future output on multi-year contracts, and the buyers signing those contracts are the companies building AI data centers. Everyone else buys what is left, at a higher price. So the memory industry's record profits do not mean every market is strong. They mean AI is strong enough to outbid everyone else, and everyone else is shrinking to make room.

Step one: prices stopped doing all the work

For the past year, memory makers grew mostly by raising prices. This quarter that started to change.

SK hynix's DRAM price increases have slowed three quarters in a row, from about 60% to about 30% to the high-20s (call commentary). Micron's slowed from the low-60s to the high-teens, and it told investors to expect "a more moderate rate of price increases." At Sandisk, price drove two-thirds of growth last quarter and about 40% this quarter (call commentary). Samsung's margin dipped for the first time in five quarters.

That is not weak demand. It is a market that has stopped auctioning its output and started allocating it.

Step two: the supply went under contract

At the same time, the contracts arrived. SK hynix has signed long-term deals with 14 customers covering more than half of its 2027 and 2028 capacity. Samsung has signed 10 and is talking to 10 more (call commentary). Micron has 26 take-or-pay deals with price floors (call commentary). About half of Sandisk's next-year output is already spoken for (call commentary).

A contract does two things. It stops the price from running away for the buyer who signed. And it takes that supply off the open market for everyone who didn't. That is why price growth is flattening at the top while costs keep rising for everyone below.