From surplus to shortage, AI is "devouring" storage chips

"The cost of memory is about 120% higher than a year ago." According to a statement from the Raspberry Pi official website, the company's CEO Eben Upton reluctantly announced a price increase for products in October 2025. This microcomputer company, known for its high cost-performance ratio, cannot escape the global surge in storage chip prices.

Just a year ago, the prices of solid-state drives were at historical lows. According to technology media Tom's Hardware on October 4, the price of high-performance NVMe drives had once been equivalent to that of a regular mechanical hard drive. However, the market trend completely reversed in 2024, with an AI-driven supply storm approaching.

Price Roller Coaster: From Bottom to Peak

The market reversal is rooted in the cyclical nature of the storage manufacturing industry, but this time it has been infinitely amplified by the demand from AI and hyperscale data centers.

Industry data shows that in the second half of 2023, the spot price of 512Gb TLC NAND flash memory, which had fallen to historical lows, rose by more than 100% within six months, with contract prices following suit. Market prices monitored by the media indicate that by early 2024, the price of Western Digital's 2TB Black SN850X had surpassed $150, while Samsung's 990 Pro 2TB jumped from about $120 during the holiday period to over $175.

The recovery of the DRAM market lagged behind NAND by a quarter, but the pattern is similar. According to research firm TrendForce, the price of PC-grade DDR4 products is expected to surge by 38-43% quarter-on-quarter in the third quarter of 2025. Even GDDR6 memory used in graphics cards has reportedly seen a price increase of about 30% due to supply shortages.

The "Insatiable" Demand of AI

The trigger point for this cycle is undoubtedly artificial intelligence. Training and deploying large language models require massive amounts of memory and storage, with each GPU node in a data center consuming hundreds of GB of DRAM and several TB of flash memory.

The scale of procurement is astonishing. According to Tom's Hardware, OpenAI's "Stargate" project recently signed a supply agreement with Samsung and SK Hynix for up to 900,000 DRAM wafers per month. This figure alone is close to 40% of global DRAM production.

Cloud service providers are also locking in supplies in the same aggressive manner. Reports indicate that high-density NAND products have effectively been booked out months in advance. Micron's high-bandwidth memory products are nearly sold out through 2026. Contract terms have extended from the previous quarter to several years, with giants making direct purchases at the source.

The Difficult Choices of the Supply Chain

The shortages are not just a result of surging demand; supply is also being redirected.

After experiencing multiple cycles of "expansion-collapse," storage manufacturers have become exceptionally cautious. They are prioritizing capital expenditures towards highly profitable HBM and advanced process nodes. The CEO of Phison Electronics pointed out in a recent interview that this shift in capital expenditure will lead to sustained supply tightness over the next decade "There are two reasons. First... every time flash memory manufacturers increase investment, prices crash, and they can never recover their investment... Then in 2023, Micron and SK Hynix shifted massive capital expenditures to HBM because its profit margins were too tempting, leaving even less investment for flash memory," he explained.

These actions have made the supply of mainstream products tighter. DDR4 production lines are shutting down at a faster rate than demand is declining. For the first time in history, both NAND flash and hard drives are experiencing supply constraints simultaneously. Reports indicate that Western Digital has notified partners to raise hard drive prices by 5-10% by April 2024, and TrendForce recently pointed out a shortage of high-capacity nearline HDDs used in data centers.

Shortages May Persist

Building new fabs is a solution, but it is costly and time-consuming. A brand-new memory fab requires hundreds of billions of dollars in investment and several years to reach mass production scale. Additionally, geopolitical factors add more complexity to the supply chain, and the supply of rare earth magnets used for hard drives is also affected by trade frictions.

Manufacturers are wary of repeating past mistakes. If demand cools or procurement pauses, an oversupplied market will lead to a price crash. The scars from 2019 and 2022 are still fresh.

Therefore, for consumers, the era of ultra-cheap PC upgrades may come to a temporary halt. For enterprise customers, it means preparing for much larger infrastructure budgets. The market will eventually rebalance, but no one can predict when that will happen. Until then, comprehensive analyses suggest that the prices of storage chips are likely to remain high until 2026 and beyond