JPMorgan has released its latest research report on the HBM memory sector, addressing market concerns over potential HBM specification downgrades while updating the industry's supply-demand dynamics, downstream demand, technology roadmap, competitive landscape, and investment outlook.
The bank asserts that even if specification downgrades occur, HBM supply and demand will remain tight, with bit demand projected to grow at a compound annual growth rate of 63% from 2026 to 2028. Pricing momentum is expected to persist, keeping the memory sector attractive from an investment standpoint.
On supply and demand, the report raises its HBM demand forecast for 2026-2027 while trimming the 2028 estimate, keeping cumulative bit demand over the three-year period essentially unchanged at 163 billion Gb. With the higher mix of cost-effective 8Hi products and the earliest adoption of 16Hi technology pushed to 2029, the industry is expected to stay in a supply shortage throughout 2026-2028. The supply-demand gap is projected to narrow slightly from -20% to -16%, with the cumulative duration of shortage extending further.
On the supply side, the modest increase in HBM wafer allocation from Samsung is the main factor lifting overall output. The HBM market size is expected to reach $160-282 billion in 2027-2028, accounting for 18-24% of the combined DRAM revenue of the top three memory makers.
In terms of capacity, 58% of new DRAM capacity added between 2025 and 2028 will be dedicated to HBM manufacturing, raising HBM's share of total DRAM capacity from 19% to 31%.
A key shift in the customer landscape is anticipated, with ASIC custom chips projected to overtake Nvidia as the largest HBM consumer by 2027. In 2026, Nvidia remains the core buyer, representing 58% of total demand, but ASIC server shipments are expected to grow 102% year-over-year, far outpacing Nvidia's 15%. By 2027, ASIC demand share rises to 48%, while Nvidia's falls to 43%, although HBM content per Nvidia chip remains higher than ASIC, the capacity premium between the two is expected to gradually narrow.
On pricing and profitability, HBM average selling prices are forecast to rise 54% year-over-year in 2027 and another 25% in 2028, reaching $3.8 per Gb. HBM operating margins are expected to hold in the mid-to-high 60% range, lower than server DRAM under long-term agreements, but significantly improved from previous years. Pricing and margins for products outside long-term contracts are expected to keep climbing through 2028.
On the technology front, the industry is moving toward a multi-SKU tiered structure. 8Hi products will see extended lifecycles as the cost-effective option, while 12Hi targets the high-performance segment. TCB remains the mainstream packaging solution at this stage, and customized HBM is set to become the next competitive battleground, with Nvidia's NVHBM custom product expected to launch by the end of 2028.
Regarding competitive dynamics, Samsung and Micron continue to close the gap with SK Hynix, with their combined HBM revenue share projected to reach 59% by 2027. In a supply-constrained environment, competition is unlikely to suppress average selling prices. Custom chips from AI labs such as OpenAI and Anthropic represent a long-term upside variable not yet priced into current estimates.
From an investment perspective, the report is bullish on the memory sector, noting that the market has partially digested the spec downgrade headwinds. The supporting thesis is built on tight HBM supply-demand fundamentals, value enhancement from customization, and resilient pricing. After the recent pullback, stock prices have rebounded meaningfully. Based on shareholder return potential, SK Hynix remains the top pick, and if Samsung increases dividends and buybacks, its investment appeal could improve further.
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