The most severe memory shortage in history has pushed Samsung to become the world's second-largest company.
- Core Insight: Demand for AI infrastructure is propelling the memory chip industry into a "super-cycle of prosperity." The bottleneck has expanded from GPUs to memory hardware such as HBM, DRAM, and NAND, driving record profits for manufacturers like Samsung, SK Hynix, and Micron, and causing supply chains to shift from informal handshake agreements to long-term, high-prepayment binding contracts.
- Key Factors:
- Samsung's first-quarter net profit exceeded $30 billion, with approximately 94% of its operating profit coming from semiconductors, far surpassing its previous single-quarter record.
- Memory chip prices rose nearly 100% quarter-over-quarter in Q1 2026, roughly double the expected increase, with DRAM profit margins climbing to 80%.
- Prioritized production of HBM is squeezing the supply of traditional DRAM and NAND. New wafer fabs will not be operational until the end of 2027, exacerbating the supply gap.
- To secure production capacity, customers have accepted five-year contracts, 30% down payments, or joint investments in fabrication plants, replacing the previous handshake agreements.
- The rise of inference demand is driving the expansion of general-purpose servers, further boosting demand and profitability for traditional memory chips.
Original title: AI Has Made Memory Chips One of the World's Most Profitable Products
Original author: Jiyoung Sohn, Andrew Barnett, The Wall Street Journal
Original translation and compilation: Peggy, BlockBeats
Editor's note: Nvidia was once the most prominent winner of the AI infrastructure cycle, but the latest wave of chip demand is showing that AI's bottlenecks lie not just in GPUs, but also in memory.
Over the past year, global capital expenditures have continuously flowed into AI, first boosting demand for high-bandwidth memory (HBM) and subsequently squeezing supply for traditional DRAM and NAND flash. As large model training requires pairing GPUs with HBM, and inference demand drives expansion in general-purpose servers, memory chips have transformed from a cyclical industry into one of the most scarce and profitable segments in the AI supply chain.
This is also the reason behind the collective earnings surge for Samsung, SK Hynix, and Micron. Memory chip prices rose nearly 100% in the first quarter, pushing Samsung's Q1 net profit to over $30 billion, with the semiconductor business contributing the vast majority. Memory chip prices surged nearly 100% quarter-over-quarter in the three months leading to 2026, far exceeding market expectations. More importantly, this is not just a simple short-term price increase, but a repricing of supply-demand dynamics: the long construction cycles for new fabrication plants, combined with the higher capacity consumption of HBM, further compress traditional memory supply.
Against this backdrop, memory chips are transitioning from "supporting components" to "strategic resources." Server, PC, and smartphone manufacturers are paying premiums to lock in capacity, even accepting five-year contracts, prepayments, and co-investments in new fabs. The supply relationships once maintained through handshake agreements are shifting toward long-term binding commitments. In other words, AI competition is no longer just about models, computing power, and cloud platforms; it has also become a battle for control over the underlying supply chain.
What deserves the most attention is not how much money memory chip companies made this year, but the fact that the bottlenecks of AI infrastructure are spreading from a single type of computing power to a broader hardware system. GPUs determine whether a model can be trained, HBM determines whether data can be exchanged at high speed, and DRAM and NAND flash affect the cost structure of inference and server expansion. As more companies believe that "whoever controls the memory supply controls AI," the period of exorbitant profits for memory chips is essentially a signal that AI infrastructure has entered a phase of resource competition.
Below is the original text:
Ranked by net profit, chip manufacturers entering the global top 20.
By the end of last year, global investment in AI had pushed the memory chip industry into a "super boom cycle." Profits set new records, and prices were expected to rise another 50% in the first three months of 2026 compared to the previous quarter.
But that wasn't the end of the story. The reality has been even better—far better.
On Thursday, Samsung Electronics reported a first-quarter net profit equivalent to over $30 billion. This not only far surpasses its previous single-quarter profit record but also approaches the company's past full-year profit peak. About 94% of Samsung's first-quarter operating profit came from its semiconductor business.
Samsung's main rivals in the memory chip space—South Korea's SK Hynix and U.S.-based Micron Technology—have also recently posted equally surprising results. These three companies dominate the global memory market, and their memory chips are used alongside Nvidia's processors for AI computing.
Annual net profit of semiconductor companies
In the first-quarter data, Samsung and SK Hynix correspond to the fiscal quarter ending March 2026 (actual results); Micron corresponds to the fiscal quarter ending February 2025 (actual results); Nvidia corresponds to the fiscal quarter ending April 2026 (estimated results).
Note: Samsung's data includes all its businesses, but the semiconductor business contributed most of the profit. Exchange rate calculated at 1 USD to 1,421.22 KRW. Source: FactSet Andrew Barnett / The Wall Street Journal
Although there are growing concerns about whether AI services will ultimately generate substantial profits, the companies involved in building the related infrastructure have already reaped an epic windfall.
This historic rally shows no signs of ending in the near term. Jaejune Kim, Executive Vice President of Samsung's memory business, said on Thursday's earnings call that based on the orders Samsung has already booked, the supply shortage is expected to worsen further next year. "The available supply capacity is far from meeting customer demand," he said.
Since the beginning of this year, Samsung's stock price has risen 72%. SK Hynix's shares are up 90%, while Micron has gained 65%.
Company market share
According to data from tech market research firm TrendForce, memory chip prices in the first three months of 2026 rose nearly 100% quarter-over-quarter, roughly double the initial expected increase.
In recent years, memory chip manufacturers have prioritized production of specialized memory chips required for AI, known as high-bandwidth memory (HBM). This, in turn, has constrained the supply of traditional memory chips used in smartphones, personal computers, and general-purpose servers. Training large language models typically requires pairing Nvidia's graphics processing units (GPUs) with HBM.
More recently, demand for inference has begun to rise. Inference refers to the computational process required for a trained AI model to respond to user queries. This has spurred demand for general-purpose servers, which use traditional memory chips, thereby lifting the profitability of Samsung, SK Hynix, and Micron to a new level.
According to FactSet estimates, these three companies are expected to generate a combined net profit of approximately $350 billion in 2026. Each is poised to rank among the world's top ten most profitable listed companies, with Samsung projected to leap to second place, surpassing Alphabet, Microsoft, and Apple. A year ago, none of these memory chip makers were in the top ten.
Ranking of selected chip manufacturing companies by net profit
A chip manufacturing plant, or fab, can cost over $20 billion and take several years to build. Industry analysts say Samsung, SK Hynix, and Micron are all building new fabs, but capacity is unlikely to be fully available until the end of 2027 or 2028. Meanwhile, many production lines are already allocated to HBM, which consumes more capacity than traditional memory chips.
Memory chips are mainly divided into two categories: DRAM, used for temporary storage in servers, PCs, and other electronic devices to support faster data processing; and NAND flash, used for long-term data storage, such as storing photos on a phone.
HBM is made by stacking layers of DRAM chips and is then packaged together with processors from companies like Nvidia to accelerate AI computing. Nvidia works closely with Samsung, SK Hynix, and Micron.
MS Hwang, a semiconductor research analyst at Counterpoint, says the operating profit margins for both types of memory chips have roughly doubled from normal levels, with DRAM margins reaching around 80% and NAND flash margins reaching up to 60%.
Memory chip contract prices
Counterpoint's Hwang added that many large companies in the server, PC, and smartphone sectors are paying premiums and buying memory chips in large volumes to lock in supply and limit the capacity available to competitors. "The logic behind this is, whoever controls the memory supply can dominate AI," he said.
"What we are seeing today is the most severe memory shortage in the history of the market," said Marcus Chen, Executive Vice President of Fusion Worldwide, a global electronics component distributor. Most of Chen's clients are currently receiving only 30% to 50% of the memory chips they need. "Some clients are getting even less," he said.
For a long time, customers and memory chip manufacturers primarily relied on "handshake agreements" to ensure long-term supply. Now, in some cases, they are moving towards binding formal contracts. Peter Lee, a semiconductor analyst at Citi, says some contracts last up to five years and require customers to prepay around 30% of the cost or co-invest in the construction of new memory chip factories. "We have already seen customers willing to go this far," Lee said.
