Bernstein said in its latest global memory industry report that the current memory chip cycle remains in a high-prosperity phase, with tight DRAM and NAND supply and demand expected to persist through 2027.

The firm expects average selling prices for conventional DRAM and NAND to rise nearly 20% quarter over quarter in the third quarter of 2026, with further gains still likely in the fourth quarter.

However, as price caps under long-term agreements (LTAs) gradually limit room for further increases and new capacity is released, the current super-cycle is expected to begin "normalizing" in 2028.

At the same time, Bernstein lowered its forecast for HBM price increases in 2027.

The firm believes some manufacturers face difficulties supplying HBM4, and the transition from HBM3E to HBM4 may be slower than previously expected.

It accordingly cut its HBM price assumptions for SK Hynix (SKHY.US) while expecting Samsung to gain more HBM market share.

Even so, persistent undersupply of conventional DRAM will still keep the overall memory cycle elevated.

On individual stocks, Bernstein maintained "outperform" ratings on Samsung, SK Hynix, Micron Technology (MU.US) and SanDisk (SNDK.US).

Among them, target prices for Samsung and Micron were maintained at 440,000 won and $1,300, respectively.

Due to more conservative forecasts for HBM progress and pricing, Bernstein cut its target price for SK Hynix from 3.3 million won to 2.7 million won.

DRAM and NAND Prices May Rise Nearly 20% in Q3, Supply Shortage to Last Through 2027

Bernstein further raised its short-term conventional memory price forecasts.

The report expects average selling prices for conventional DRAM and NAND to rise about 15%-20% quarter over quarter in the third quarter of 2026.

Among them, the DRAM price increase in the third quarter is higher than the previously expected 12%.

However, because actual second-quarter prices performed weaker than expected, the overall third-quarter price level forecast is not significantly changed from before.

Price forecast charts show that both DRAM and NAND are in a very strong price-increasing phase of this cycle.

More importantly, Bernstein expects a significant supply shortage may persist until 2027.

However, the room for further sharp memory chip price increases is narrowing.

On one hand, more and more long-term supply agreements include price caps; on the other hand, PC and smartphone customers have begun reducing finished device shipments, thereby lowering memory procurement demand.

Bernstein expects that by the fourth quarter of 2026, the quarter-over-quarter increase in conventional memory prices will narrow to the mid-to-high single digits.

Entering 2027, under the constraints of long-term supply agreement price caps, prices are expected to rise only modestly.

HBM Price Increase Forecast Cut, HBM4 Mass Production Progress Becomes Key Variable

Compared with conventional DRAM and NAND, Bernstein has become more cautious about HBM price trends.

The firm lowered its forecast for HBM price increases in 2027, mainly because HBM4 supply and mass production progress still face certain difficulties.

Bernstein said its July and August South Korea memory export tracking data showed that Samsung's related HBM production regions released relatively strong signals, while data from SK Hynix's related production regions was relatively weak.

Combined with recent information about HBM4 supply difficulties, the firm therefore slightly delayed its assumed timing for the HBM3E-to-HBM4 transition and lowered its HBM price forecast for SK Hynix.

Bernstein also expects that even in 2027, HBM3E will still maintain a considerable scale of shipments and will not be quickly and completely replaced by HBM4.

HBM market share forecasts show that Bernstein continues to expect Samsung to increase its market share through better HBM4 performance and more capacity.

At the same time, the firm expects blended HBM average selling prices for Samsung and Micron to increase in 2027, but it is more conservative in its judgment on the magnitude of HBM3E and HBM4 price increases for SK Hynix.

Nvidia Rubin Ultra HBM Configuration Forecast Cut, Conventional DRAM May Benefit Instead

Bernstein also adjusted its HBM demand forecast for Nvidia (NVDA.US)'s next-generation AI chip Rubin Ultra.

The firm now assumes that about half of Rubin Ultra chips will be configured with 8-layer stacked HBM, while the other half will use 12-layer stacked HBM, lowering its average HBM capacity assumption from 1024GB to 640GB.

However, this does not mean the overall memory supply-demand picture will clearly weaken as a result.

Bernstein believes the reduced HBM demand can release some capacity for producing more conventional server DRAM.

Therefore, although the product mix between HBM and conventional DRAM will affect different suppliers' revenue, profit and market share, its impact on overall industry supply and demand is relatively limited because total memory demand still exceeds supply.

In other words, capacity freed up by lower HBM demand assumptions may be absorbed by conventional server DRAM, and the overall shortage in the memory market will still persist.

Cycle May Begin to "Normalize" in 2028, But Industry Margins Will Remain Above Historical Peaks

Regarding the market's biggest concern — how long the memory super-cycle can last — Bernstein still sees 2028 as an important turning point.

The firm expects that as more new capacity enters the market, the current severe supply shortage will begin to ease by then.

At the same time, after the scale of AI infrastructure investment continues to expand, it may gradually face constraints related to financing costs, security, the environment and employment.

Bernstein expects memory prices to begin "normalizing" in 2028, but this adjustment may be milder than previously expected.

It is worth noting that "normalization" does not mean industry profitability will fall back to levels seen in past cycles.

Bernstein expects DRAM industry gross margins may reach about 90% at the peak of this cycle, then fall back to the high 70% range by the end of 2028; NAND gross margins are expected to fall back to about 65%.

Even so, both will remain above the peak levels of previous memory cycles.

This means the 2028 Bernstein forecasts is not a "cycle collapse" in the traditional sense, but rather a gradual return from extreme shortage and ultra-high profitability to a more sustainable state.

Long-Term Agreements Lock In Demand, Memory Giants' Shareholder Returns Become Next Catalyst

As this memory cycle has already lasted about a year, Bernstein believes market earnings expectations have largely caught up with industry fundamentals, and the room for large upward earnings revisions in the future is shrinking.

Therefore, the key factors driving the next phase of memory stock performance may gradually shift from simply "price increases and earnings upgrades" to long-term supply agreements and shareholder returns.

The report shows that many memory manufacturers expect that ultimately 50% or even more of revenue or capacity will be covered by long-term supply agreements, and many agreements already include price commitments.

Taking Micron as an example, as of June this year it had signed 16 long-term agreements, of which 14 had a total contract value of $100 billion based on minimum prices; SanDisk had signed 8 agreements as of early August with a minimum contract value of $93.9 billion.

Bernstein particularly emphasized that the next thing to watch is the financial guarantees behind these agreements, because the level of guarantees will directly affect the actual binding force of the contracts.

The report shows that Micron's related financial guarantees amount to $22 billion, while SanDisk's reach $16.5 billion.

At the same time, strong free cash flow is creating conditions for memory giants to expand shareholder returns.

The report shows that the capital return frameworks of many memory companies target about 50% or more of cumulative free cash flow.

Bernstein believes that as companies further clarify buybacks, dividends and long-term supply agreement arrangements, investor confidence in the sustainability of this round of earnings is expected to strengthen, thereby driving further expansion of memory stock valuation multiples.

After the latest forecast adjustments, Bernstein continues to give "outperform" ratings to Samsung, SK Hynix, Micron and SanDisk.

Samsung's target price remains 440,000 won, Micron's target price remains $1,300, and SanDisk's target price remains $3,000.

At the same time, due to lower HBM price forecasts and more conservative HBM progress assumptions, Bernstein cut its target price for SK Hynix from 3.3 million won to 2.7 million won.