Memory chip companies will have no problem selling everything they can make for a while. The biggest risk now is that their largest customers start getting creative.
Micron's fiscal third-quarter report on Wednesday proved a stark example of how much worse the memory shortage has gotten since just three months ago. Micron's operating income in the current quarter alone is now projected to exceed the highest full-year revenue the memory chip maker has ever reported.
Micron has also locked up long-term supply deals with 15 new customers, compared with only one such deal reported in the last quarter. Those discussions gave Micron enough visibility to project the shortage running beyond 2027, whereas the company had previously been keeping its comments about industry conditions limited to the current calendar year.
Even that new outlook could prove conservative. "We have very good visibility to a five-year time horizon," Sumit Sadana, Micron's chief business officer, said in an interview.
Micron's shares shot up nearly 16% on Thursday, while rival memory maker SK Hynix jumped 13%. Flash memory maker SanDisk soared by 22%. But almost every other megacap tech stock went south, as memory chips are vital components in everything from Nvidia's AI systems to iPhones and the cloud-based AI services of companies such as Google, Microsoft, Amazon, Oracle and Meta Platforms. Excluding memory makers like Micron, Samsung and SK Hynix, the 10 public companies valued at over $1 trillion lost more than 2% of their combined market cap on Thursday.
For the time being, all those companies are at the mercy of memory chip prices that keep moving higher. Apple even took the unusual step Thursday of raising prices for several of its products between launch cycles, citing memory costs. But necessity is also the mother of invention, and there are growing signs that the tech industry is hard at work on ways to reduce future dependence on the volatile component.
Qualcomm, for instance, spent a good portion of an investor meeting on Wednesday talking about "high-bandwidth compute," a new way to use memory in an AI system that avoids use of high-bandwidth memory, or HBM, which is key to AI systems but also difficult to produce and in severe shortage. That followed reports earlier this month that Nvidia was adjusting some of the designs of its soon-to-launch Vera Rubin AI platform to use less memory.
Memory efficiency is also becoming a key bragging point for some. Cerebras, the AI chip startup that went public in a wildly successful IPO last month, used its first earnings report as a public company this week to tout the design of its megasize chips that don't include HBM at all. "It's in short supply, it's expensive, and we don't use it," Cerebras CEO Andrew Feldman said on the company's earnings call.
The prospect of technological breakthroughs that reduce future memory demand is worrisome for investors, given how much the market values of memory chip makers have soared over the past year. Micron alone lost nearly a third of its value in late March after Google published a research paper about TurboQuant, a compression algorithm that sharply reduced memory use without sacrificing AI model performance.
Analysts described the reaction as overblown, and Micron's stock has more than tripled in value since. But the move demonstrates how jumpy the market can be at current prices.
The harsh reality remains that anything that computes needs some form of system memory. And the largest consumers of that memory are worried enough about future supply to sign long-term agreements that would have once been unthinkable for a commodity with volatile prices. Micron said Wednesday that most of its latest deals are five years in duration and lock in price floors that will still be far better than those seen in past down cycles. "Even at floor prices, the contracts still beat past-cycle peak margins," Futurum analyst Rolf Bulk said.
It remains to be seen how ironclad those deals really are, as the chip industry's past experiences with supply agreements haven't always stuck. But all signs are pointing to at least two to three more years until memory supply improves to the point of testing those agreements. That is plenty of time and motivation for memory buyers to keep figuring out how to do more with a lot less. Nothing lasts forever, especially in tech.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
June 26, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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