Rising costs tied to AI workloads are accelerating a shift among major chipmakers toward cheaper memory alternatives, as AMD, Nvidia, and SanDisk move to integrate NAND flash into architectures traditionally dominated by DRAM. The strategy is aimed at easing what analysts call the growing “AI memory tax,” driven by surging demand for high-bandwidth memory (HBM).
dram prices surge as supply tightens
Memory prices have climbed sharply in 2026, reflecting the strain from AI-driven demand. TrendForce data shows DRAM contract prices jumped more than 90% quarter-on-quarter in early 2026, while Citigroup expects prices to rise 88% over the full year. NAND prices have also increased, up 74%.
A major factor is the rapid expansion of HBM, which now accounts for about 25% of global DRAM wafer production, compared with just 2% in 2020. This shift has constrained supply for other uses and pushed costs higher across the semiconductor market.
chipmakers pivot to hybrid memory approaches
Recent moves by leading companies highlight a coordinated industry shift. AMD’s acquisition of MEXT, Nvidia’s rollout of its CMX architecture, and SanDisk’s collaboration with SK Hynix on high-bandwidth flash (HBF) all point to the same goal: offloading part of AI data processing from expensive DRAM to denser, lower-cost NAND.
This transition is expected to increase demand across the NAND supply chain while reshaping pricing dynamics in related components.
nand supply chain sees uneven gains
The NAND industry is structured across three main segments:
- Upstream wafer producers such as Samsung, SK Hynix, Micron, and SanDisk, which capture the highest margins
- Midstream module makers like Jiangbolong, which package chips into SSDs and reported a 2,644% year-on-year profit surge in the first quarter of 2026
- Downstream controller chip companies including Silicon Motion, Phison, and Lianyun Technology, which manage data flow within storage devices but lag in valuation despite rising shipment volumes
Lianyun Technology stands out for its heavy investment in research and development, with spending estimated at 36% to 38% of revenue. While this weighs on profitability, the company ranks third globally among independent SSD controller providers and could benefit from expanding storage demand.
high-bandwidth flash emerges as future catalyst
HBF is gaining attention as a potential long-term complement to HBM. Developed by SanDisk and SK Hynix, the technology stacks NAND using through-silicon vias to replicate HBM performance at a lower cost.
Early estimates value the HBF market at around $12 billion by 2030, compared with $117 billion for HBM, suggesting it will supplement rather than replace existing solutions. Initial production samples are expected by late 2026.
Companies positioned to benefit include packaging firms JCET and Tongfu Microelectronics, along with materials supplier Huahai Chengke. However, most have yet to secure confirmed HBF orders or move into scaled production.
strong pricing supports short-term profitability
NAND contract prices continued rising in the second quarter, increasing more than 70% quarter-on-quarter and sustaining strong earnings for upstream producers and module manufacturers. At the same time, valuations reflect elevated expectations, with SanDisk trading at a price-to-earnings ratio near 69.
Market volatility remains evident. Major semiconductor stocks saw pullbacks of 6% to 7% in mid-June, while the Philadelphia Semiconductor Index dropped 10% earlier before recovering, underscoring sensitivity to sentiment shifts.
structural shift reshapes memory market outlook
The current pricing surge is largely attributed to production capacity being redirected toward AI data centers, reducing supply for other applications and intensifying competition for memory components. Industry executives, including Silicon Motion CEO Wallace Kou, have described the shift as structural, with shortages potentially extending into 2027.
NAND pricing trends are increasingly viewed as a key indicator of market direction. Continued increases would reinforce the current cycle, while stabilization could signal a slowdown in momentum.
traders watch key signals for next phase
The longer-term outlook will depend on whether NAND-based alternatives can meaningfully reduce reliance on DRAM. If successful, the scarcity-driven premium in DRAM could weaken.
Market participants are closely monitoring several indicators, including HBF prototype yields expected later in 2026, adoption levels of Nvidia’s CMX platform, and turning points in NAND contract pricing.
Until clearer signals emerge, the sector remains supported by strong AI-driven demand. However, with leading chipmakers trading at elevated levels, attention is gradually shifting toward underpriced segments such as controller chip companies, where growth is tied more directly to shipment volumes than commodity price fluctuations.
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