AI Demand Fuels Memory Shortage, With Supply Gap Expected to Persist Through 2027

As the artificial intelligence industry booms, high-bandwidth memory (HBM) has become a critical component in AI chips. South Korea announced an 800 trillion won semiconductor investment plan in June 2026 that aims to double SK Hynix and Samsung's DRAM capacity by 2030. As the HBM market leader, SK Hynix's expansion pace is crucial to the stability of global AI chipmakers' supply chains and could reshape supply and demand across the semiconductor industry.

Bank of America said in a July 2026 report that technical and construction bottlenecks could limit SK Hynix's additional memory capacity through 2028 to just one-sixth of the planned amount, while bringing new plants to full operation could take 10 years. The constraints threaten its goal of doubling capacity by 2030 and could directly slow its shift toward HBM and other critical AI components. Combined with a price-manipulation lawsuit facing the company, they could also prolong tight memory supplies.

Surging demand from generative AI and data centers has made high-bandwidth memory, or HBM, an essential component of AI chips. Its complex manufacturing process and heavy use of production capacity have sharply squeezed output of conventional DRAM. That has made the capacity and investment plans of SK Hynix, the world’s second-largest memory chipmaker, a key barometer for the global semiconductor supply chain and the pace of AI chip shipments by technology giants such as Nvidia.

SK Hynix Chief Executive Kwak Noh-jung warned in July 2026 that the global memory market would face its worst-ever supply shortage in 2027, with tight supply and demand conditions expected to persist through 2030. In response, the company raised $26.5 billion by listing American depositary receipts on Nasdaq on July 13. It has also announced a $4 billion investment in an advanced packaging plant in Indiana as it moves to expand global capacity to address a structural shortage of AI chips.

Explosive growth in generative AI and data centers has driven a sharp increase in demand for high-bandwidth memory (HBM). With such chips generating exceptionally high margins, semiconductor giants Samsung and SK hynix have shifted capacity toward AI-specific memory. That has left standard DRAM and NAND flash memory used in conventional smartphones in short supply, posing a severe challenge to budget handsets that are highly sensitive to component costs.

The latest industry research forecasts that global shipments of budget smartphones priced below $400 will fall by more than 22% year on year in 2026 as memory prices continue to rise. As the component supply-demand imbalance worsens, entry-level phones priced below $100, once common in the market, could disappear by the end of 2026. The trend shows that AI's displacement of production capacity is already having a tangible impact on mass-market consumers.

Demand for computing power and data transmission is surging with generative AI, but wafer capacity, advanced packaging and electricity supply are struggling to expand at the same pace. Memory has consequently shifted from a commodity component to a bottleneck affecting AI performance and deployment costs. South Korea's SK Securities expects industry valuations to focus less on business cycles and more on supply scarcity and earnings visibility, benefiting Samsung Electronics and SK Hynix.

As of July 20, 2026, SK Securities' latest assessment said constraints on physical AI capacity and electricity supply were increasing memory's strategic value. It said the market had yet to fully price in the long-term earnings potential of Samsung Electronics and SK Hynix, making both companies undervalued plays in the AI era. The reports did not specify the report's publication date, target prices or any figures, saying only that their shares were severely undervalued.

Heavy use of HBM in AI data centers has prompted Samsung, SK hynix and Micron to shift standard DRAM capacity toward higher-margin products. The three companies control more than 95% of global DRAM supply, affecting the automotive, medical-device and consumer-electronics industries. The U.S. CHIPS Act of 2022 allocated $52.7 billion to strengthen domestic semiconductor manufacturing and research and development.

On June 3, 2026, nine major trade groups—including NCTA, the Telecommunications Industry Association, the Alliance for Automotive Innovation and the National Retail Federation—sent a letter to Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick. Warning of unprecedented price increases and shrinking supply, they called on the administration to use the CHIPS Act and trade agreements to accelerate capacity expansion in the United States and allied countries while safeguarding non-AI industries.

The expansion of AI server capacity is driving demand for HBM, DRAM and NAND. Servers now account for roughly half of global DRAM demand and about 40% of NAND demand. Goldman Sachs said HBM consumes more wafer capacity, while limited expansion in conventional memory production makes this AI-driven period of shortages and high profitability different from previous cycles.

In a June 1, 2026, report, Goldman Sachs forecast that the DRAM supply deficit would reach 5.9% in 2027 and that shortages would persist through 2028. It raised its 12-month price target for Samsung Electronics to 480,000 won and for SK Hynix to 3.5 million won, retaining “Buy” ratings on both. Its price target for MediaTek was NT$5,000.

The generative AI boom and wave of data-center construction have driven demand for high-bandwidth memory, or HBM, and DRAM, making memory a critical bottleneck in the AI chip supply chain. SK hynix is a major NVIDIA supplier, while TSMC provides advanced manufacturing and packaging. Cooperation among the three companies will directly affect global AI server capacity and costs.

SK Group Chairman Chey Tae-won predicted at NVIDIA GTC 2026 that the memory supply shortfall caused by expanding AI demand could persist through 2030. He also called TSMC an indispensable partner in building AI solutions. SK hynix is preparing a plan to stabilize DRAM prices and is considering issuing American depositary receipts, or ADRs, in the United States, but has not disclosed the size or timing of a potential offering.