Bank of America Forecasts 40% DRAM Hike as AI Squeeze Intensifies Supply

Woofun AI reports that Bank of America has significantly revised its memory market outlook, projecting a 30-40% increase in average DRAM selling prices for the third quarter, a figure that sharply diverges from TrendForce’s more conservative 13-18% forecast. This upward revision is driven by an intensifying supply squeeze caused by AI server demand, which is absorbing capacity that would otherwise serve mainstream PC and consumer markets. The divergence in forecasts highlights a critical shift in market dynamics, where downstream buyers are increasingly accepting higher contract prices, signaling a structural tightening in the memory supply chain that extends beyond spot market volatility to long-term procurement budgets.

The mechanics of this price adjustment are becoming evident in July, as Tier 2 OEMs and module factories have begun accepting PC DRAM contract prices that are 15-20% higher than those negotiated in June. This acceptance marks a pivotal moment, as it indicates that the supply chain tightness is no longer confined to trading platforms but is permeating into inventory planning and quarterly procurement strategies. While spot prices have already reflected some of this pressure, the integration of higher costs into formal contracts suggests a sustained upward trajectory. The previous forecast of a 13-18% increase is now being overshadowed by the reality of a 30-40% average DRAM selling price increase, driven by the urgent need for inventory replenishment and the limited availability of high-capacity modules.

Structurally, the primary driver of this supply constraint is the relentless demand for AI servers, which requires high-bandwidth memory (HBM), high-capacity DRAM, and specialized server memory. These high-value components are absorbing a disproportionate share of production capacity, thereby squeezing the supply of mainstream PC DRAM and even some DDR4 variants. For major manufacturers such as Samsung Electronics, SK Hynix, and Micron, this reallocation of resources means that the contract price increases are exceeding market expectations, directly enhancing their profit outlook for the second half of the year. The shift in capacity allocation is not merely a temporary fluctuation but a strategic response to the higher margins offered by AI-related products, which are fundamentally altering the supply landscape for traditional memory segments.

In contrast, TrendForce’s baseline forecast, issued on July 3, projected a more moderate increase of 13-18% quarter-over-quarter for general DRAM contract prices and a 10-15% rise for NAND Flash. This analysis had already accounted for the supportive role of AI server demand and the impact of PC DRAM supply being squeezed by server capacity reallocation.

However, the slower pace of TrendForce’s prediction suggests a more gradual adjustment in the market, whereas Bank of America’s channel checks indicate a more aggressive and immediate price correction. The discrepancy between these two forecasts underscores the uncertainty in the market, with some analysts anticipating a rapid escalation in prices due to the acute shortage of high-end memory components.

Spot price data further corroborates the bullish sentiment, with the 16Gb DDR5 spot price hovering around $50 and DDR4 spot prices exceeding $80. These figures, while potentially differing from derivative prices displayed on public quoting websites, provide a more accurate reflection of the actual transaction costs in the market.

Additionally, server memory prices remain at elevated levels, with the contract price for a 64GB DDR5/DDR4 server module surpassing $1000, and DDR5 modules reaching approximately $1400. This broad-based price increase across PC, server modules, and high-end DRAM indicates that the supply crunch is not isolated to a single product category but is affecting the entire memory ecosystem, reinforcing the notion of a systemic shortage.

A more critical variable is the capital expenditure guidance from Alphabet/Google, which serves as a key indicator of future demand. In its June investor materials, Alphabet provided a 2026 capital expenditure guidance of $180-190 billion, noting a "significant increase" for 2027 but stopping short of an official $300 billion commitment. Bank of America analysts, however, estimate a higher range of $195-205 billion for 2026 and nearly $290-300 billion for 2027. Under this assumption, memory chip purchases in 2027 could increase by over 50% compared to 2026. Although these figures are based on analyst models rather than concrete orders, they explain the heightened sensitivity of memory stock prices to cloud company capital expenditure expectations, as investors price in the potential for sustained demand growth.

Alphabet’s second-quarter performance has further bolstered market confidence, with revenue growing by 24% year-over-year and Google Cloud revenue surging by 82% year-over-year. The cloud business backlog has reached an impressive $514 billion, reflecting strong demand for AI infrastructure and cloud services. This robust financial performance suggests that large tech companies have the capability and willingness to continue investing heavily in AI infrastructure, which will drive demand for memory chips in the coming years. The growth in the cloud business and the strong backlog provide a solid foundation for the optimistic memory price forecasts, as they indicate a sustained and scalable demand for high-performance computing resources.

Trade data from South Korea also supports the narrative of strong memory demand, with exports totaling $54.9 billion from July 1 to 20, a 52.3% year-on-year increase. Semiconductor exports alone reached $22.1 billion, up 180.6% year-on-year, accounting for 40.3% of total exports. This surge in semiconductor exports provides a real-order backdrop for the strong demand for AI servers, enterprise procurement, and restocking activities. In China, memory chip imports in May 2026 were valued at $30.

77 billion, accounting for 54.3% of chip imports and representing a 248.7% year-on-year increase, according to Zhejiang Hengshang’s "China Chip Product Trade Monthly Monitoring Report." While the initial draft citing June imports of $32 billion lacks publicly verifiable sources, the May data still indicates a high level of memory import activity, driven by the need for high-end DRAM, server memory, and AI-related products from Korean and global leading suppliers.

Woofun AI data shows that NAND prices are also on the rise, with the spot price of a 1Tb NAND wafer reaching $25.5, a 2% weekly increase.

However, the main theme of this round of price increases is the higher-than-expected PC DRAM contract price and the driving force of AI capital expenditure, with NAND serving more as evidence of the tight supply and demand situation in the memory sector.

Additionally, Samsung Electronics may signal a new shareholder return initiative during its second-quarter earnings conference call on July 30 at 10:00 KST. Market expectations include the announcement of a large-scale stock buyback plan and the pre-issuance of a portion of the 2026 cash dividend. While these are potential catalysts rather than confirmed facts, they could provide emotional support to memory stocks, further boosting investor sentiment.

The sustainability of this price increase depends on two key factors: the ability of large tech companies to meet high AI capital expenditure expectations and the timing of supply expansion. Google’s nearly $300 billion capital expenditure by 2027 is an estimate by Bank of America analysts, not an official commitment, and any slowdown in data center construction could lead to a reassessment of memory procurement growth and price sustainability.

Furthermore, supply expansion may bring pressure back after 2026-2027, as manufacturers become more willing to expand production and reallocate capacity in response to higher prices. If newly added supply is released intensively while demand growth slows, both DRAM and NAND prices could decline. CXMT’s production expansion is also a long-term pressure, particularly for mid-range and low-end supply, which could affect DDR4 and consumer DRAM prices first. Memory manufacturers are currently benefiting from price elasticity, but they will soon face the gap between order realization and the return of supply, making the current bullish outlook contingent on sustained demand and controlled supply growth.