Jefferies forecasts memory chip prices to surge 50% in Q3, 45% more next year

US investment bank Jefferies forecasts that memory chip prices will continue to surge in the second half of this year, rising 30 to 50 percent quarter-on-quarter in the third and fourth quarters.

US tech outlet Wccf Tech reported Sunday, citing a recent Jefferies report, that DRAM and NAND flash prices are expected to climb 40 to 50 percent quarter-on-quarter in the third quarter and 30 to 40 percent in the fourth. Jefferies also projected that memory chip prices will rise a further 40 to 45 percent next year compared with this year.

The rally is expected to extend into next year before potentially hitting an inflection point in 2028, according to Jefferies. The bank said new supply could increase 10 to 15 percent by 2028, putting downward pressure on average selling prices.

The sharp rise in average selling prices is being driven by large-scale AI data center operators racing to lock up supply. Jefferies said 50 percent of total global memory chip output is currently tied up in long-term agreements between memory manufacturers and top-tier big tech companies.

Among the most prominent of these arrangements are 16 strategic customer agreements Micron has signed, which include purchase obligations covering this year through 2030. As data center operators lock up supply through long-term contracts, memory chips available for consumer products become increasingly scarce. Jefferies said that if the share of long-term supply agreements rises to 70 percent, memory supply for consumer devices such as PCs, laptops and smartphones will tighten further.

Jefferies said Chinese memory chip makers are entering the market but are unlikely to ease the shortage in any meaningful way. CXMT, China's leading memory chip company, lags global leaders by 1.5 to 2 generations in DRAM technology and will not significantly affect the global memory market until next year at the earliest, the bank said. Jefferies added that Chinese manufacturers' supply expansion could become a variable from 2028 onward.

Micron's third-quarter earnings for the March-to-May period support this outlook. The company posted sales of $41.5 billion in the quarter, a 346 percent increase from the same period last year, driven by DRAM prices surging more than 60 percent quarter-on-quarter and NAND flash prices jumping more than 80 percent. Micron guided for $50 billion in sales in the fourth quarter.

Micron CEO Sanjay Mehrotra said the company can meet only 50 to 67 percent of customer demand in the medium term. He said meaningful new supply would not come online until 2028 or later, when the company's new fab in Idaho is expected to begin operation.

Other research firms share the view that memory chip prices will keep rising this year. Gartner forecast that combined DRAM and SSD prices will surge 130 percent by year-end, pushing the average PC price up 17 percent and cutting global PC shipments by 10.4 percent. Taiwan-based market research firm TrendForce also said PC DRAM contract prices will continue to rise in the third and fourth quarters.