HBM Demand Surges: UBS Predicts DRAM Supply Shortage to Last Until 2028

UBS Group's latest July 'Memory Chip Monthly Report' reveals that the global memory chip market achieved a record-breaking monthly sales figure of $74.6 billion, a 31.7% increase from the previous month, marking a historic high. Driven by rapidly rising demand for high-performance computing and data centers from artificial intelligence (AI), along with ongoing long-term supply agreements (LTAs), UBS believes the memory industry cycle continues to heat up, with structural supply shortages unlikely to ease before mid-2028.

The report indicates that DRAM remains the largest product category in the memory market, generating approximately $48 billion in monthly revenue, a 27.7% increase from the prior month. NAND Flash performed even more strongly, achieving monthly revenue of $25.8 billion, up 40.7% month-on-month, also setting a new historical high.

NAND Flash is a core component of solid-state drives (SSDs) and data center storage systems. As AI model training and inference computing demands grow rapidly, enterprise demand for high-capacity, high-performance storage equipment has surged, becoming a key driver for the NAND market.

Overall, UBS forecasts that global memory industry revenue will reach $992 billion in 2026 and surge to approximately $1.76 trillion in 2027—nearly doubling the previous year's figure.

The primary growth engine of this memory upcycle is high-bandwidth memory (HBM). HBM is primarily used alongside AI accelerators, including NVIDIA's (NVDA-US) AI GPUs, and has become an essential component in AI servers.

UBS estimates that HBM demand will grow 90% year-on-year in 2026, reaching 33.1 billion Gb, and is expected to increase by another 77% in 2027, rising further to 58.7 billion Gb—reflecting the continued rapid expansion of AI infrastructure.

On the supplier side, UBS believes Micron Technology (MU-US), Samsung Electronics, and SK hynix will be the biggest beneficiaries of the current memory price surge. These three companies collectively control the vast majority of global DRAM and NAND Flash supply capacity, and their profitability is expected to continue improving amid tight supply conditions.

UBS notes that major global cloud service providers will continue to expand investments in AI data centers, keeping memory demand at elevated levels. As a result, structural supply shortages in the memory market are expected to persist at least until the second quarter of 2028.

On pricing, UBS has revised upward its forecast for DDR memory contract prices, expecting a 32% increase in the third quarter of 2026 compared to the previous quarter, followed by an 18% increase in the fourth quarter. NAND Flash prices are also expected to strengthen, with a projected 30% increase in Q3 and a further 12% rise in Q4.

In terms of supply-demand dynamics, UBS forecasts global DRAM demand to grow 36.2% year-on-year in 2027, while supply will increase by only 19.3%. Demand growth is nearly double that of supply, making the supply-demand gap difficult to close in the short term—this imbalance remains a key factor supporting sustained price increases.

However, UBS cautions that the AI investment boom is not without risks. The report identifies the biggest uncertainty not in supply, but in customers' tolerance for continuous price hikes and whether AI-related capital expenditures can sustain high growth over the long term.

UBS states that whether hyperscalers continue investing in AI data center construction will be the key variable determining whether this memory supercycle can continue. A slowdown in AI capital spending could affect memory demand growth and alter current market expectations regarding supply-demand gaps and price increases.

Despite this, UBS maintains that AI-driven memory demand currently far exceeds supply growth, and the industry's fundamental outlook remains unchanged. The HBM, DRAM, and NAND markets are still in a state of structural undersupply, and the memory supercycle has not yet ended.