#BernsteinSaysMemoryBullMarketToLastUntil2027

The AI Infrastructure Story Still Has Room to Run I read an interesting report last week, with Bernstein’s take on the memory chip cycle. Their forecast: the current bull market in memory chips could run all the way through 2027. The eye-popping part of price increases might be topping out, but that doesn't necessarily mean the opportunity is over, and a more sustainable pace actually might be healthier for the sector long term.

That's the beauty of AI.

Every single new AI model, cloud platform, and giant new data center requires a lot of fast memory, and I would say long-term demand from AI cloud providers outweighs a potential slowdown from consumer electronics. We are transitioning from smartphone driven demand to enterprise AI infrastructure and that is a major structural change. Bernstein notes “DRAM price continued to increase from the previous quarter while select NAND products prices continue to move up. Although quarterly growth may be decelerating from previous highs, the market trend remains strong given the continued investment in AI.

It’s always interesting to me how investors get stuck on only thinking about AI software without acknowledging the hardware required to deliver these services and products and perhaps, some of the hardest, most essential and enduring work.

I believe companies who provide these chips might still end up as among the biggest long-term beneficiaries of the AI trend. “ Now, to be sure, valuations already reflect this story to some degree, so I wouldn’t rule out pullbacks, even for solid companies after significant runs. It’s rare for markets to cooperate in straight lines, and those are the periods when investors have the greatest tendency to react to the latest data point or price movement instead of the underlying trend.

For me, the key question for these companies is not whether DRAM prices are going to rise 3-5% in a given quarter. Instead it is whether AI investment continues to accelerate over the next several years and if so, can these companies, which are the foundation, continue to perform well over the long term? Should AI Demand be strong enough to continue the memory chip cycle through 2027 or is the market pricing in too much of the AI hype?

‍#AI #GateSquare