Global DRAM suppliers are tightening control over pricing as demand for high-bandwidth memory (HBM) used in artificial intelligence continues to rise, pushing costs sharply higher and straining cloud spending. Research indicates memory could account for up to 40% of cloud providers’ capital expenditures by 2027, with a market turning point now expected around mid-2027—earlier than previously forecast.
Samsung, SK Hynix, and Micron dominate the DRAM market with a combined 89% share, giving them significant pricing power. Contract prices have surged nearly 700% year-on-year, while gross margins have climbed to around 60% or higher. Limited capacity expansion has allowed suppliers to continue raising prices.
Cloud spending ramps up under pressure
Major cloud companies such as Microsoft and Amazon are increasing budgets to manage rising component costs. Microsoft alone lifted its capital spending by $25 billion to absorb higher memory and chip prices. Memory is projected to account for about 30% of cloud capital expenditure in 2026, rising to between 36.2% and 40% in 2027.
The surge in spending is putting pressure on cash flow. As much as 98% of operating cash is now being directed toward capital expenditures, the highest level since the early 2000s tech bubble. Total global capital outlay is expected to reach about $1.1 trillion in 2027, with roughly $440 billion potentially going toward memory.
Supply constraints to persist into 2028
Supply relief is not expected soon. Micron chief executive Sanjay Mehrotra said meaningful new capacity will not come online until 2028, extending the current imbalance. Some analysts now believe tight market conditions could last well into that year despite planned expansions.
Prices continue to reflect this scarcity. Forecasts suggest DRAM average selling prices could rise another 30% in the third quarter of 2026, while HBM prices may double in 2027. SK Hynix and Micron have reportedly already sold out their HBM capacity for the remainder of 2026.
Profit margins soar for chipmakers
The constrained supply environment is driving exceptional profitability for memory producers. Analysts estimate margins could reach around 80% for SK Hynix, 78% to 80% for Micron, and 70% to 75% for Samsung before easing in mid-2027 as new capacity gradually comes online.
Recent earnings reflect the trend. SK Hynix reported a 405% year-on-year jump in operating profit in the first quarter of 2026, while Micron is expected to post record free cash flow in its upcoming results.
Technology shifts reshape memory demand
Advances in memory architecture are also influencing supply dynamics. Current HBM3 designs stack 12 layers of DRAM, while HBM4 is expected to reach 16 layers, boosting performance but increasing manufacturing complexity. Producing HBM consumes roughly three times the equipment capacity of conventional server memory, diverting resources and tightening supply further.
At the same time, chipmakers are exploring ways to reduce reliance on expensive DRAM. Nvidia’s upcoming Rubin platform is expected to cut system memory per rack significantly, while AMD is investing in software-based solutions that allow cheaper storage to function more like DRAM.
Financing pressures and market outlook
Cloud providers are increasingly relying on debt and equity issuance to fund infrastructure expansion as spending levels approach or exceed operating cash flow. The top five U.S. cloud companies alone are expected to spend between $660 billion and $690 billion in 2026, nearly double 2025 levels.
While earlier forecasts pointed to a slowdown in 2027, that outlook is now being reassessed. If spending moderates or expansion pauses, memory suppliers could see margins decline toward the low-60% range by 2028, with further stabilization by 2030.
For now, traders are closely watching guidance from chipmakers and capital spending updates from major cloud firms. Any shift in pricing or demand expectations could significantly alter the market’s trajectory.
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