Micron and SanDisk shares ticked higher in Tuesday's premarket session, adding to a rally fueled by persistent AI demand and constrained memory supply. The gains follow Friday's surge, when Micron jumped 6.1% and SanDisk climbed 11.9%, as investors bet on a prolonged upcycle for DRAM and NAND chips.
However, the sharp run-up in memory prices is creating a new concern: consumers and device makers are starting to push back. TrendForce data shows global smartphone production fell 8% year-over-year in the second quarter to about 275 million units. While the firm raised its 2026 production forecast to 1.07 billion units, it cautioned that the improvement doesn't signal a genuine recovery. Some consumers accelerated purchases to avoid further price hikes, while manufacturers restored output that had been cut too aggressively.
AI demand keeps the shortage alive
The immediate fundamentals remain robust. AI data centers are consuming massive amounts of DRAM and NAND, and manufacturers are shifting capacity toward high-value products like high-bandwidth memory (HBM). This benefits Micron, which has significant exposure to both HBM and conventional DRAM, while SanDisk remains a major beneficiary of tight NAND supply.
New capacity won't arrive quickly. TechInsights chief strategy officer Dan Kim told the Financial Times that no meaningful new supply is expected until at least 2028, as AI demand continues to overwhelm available capacity. Micron's expansion plans illustrate the challenge: its New York complex isn't expected to deliver meaningful output until 2030, and its Idaho facility is slated to begin wafer production in 2027.
Investors have reason to believe the shortage can persist for the foreseeable future. As noted in recent coverage of memory pricing trends, firm pricing and tight supply have been supporting the sector.
Consumer demand shows cracks
The more pressing risk is emerging downstream. TrendForce warned that smartphone output could face renewed pressure in 2027 as the pull-forward effect fades and memory contract prices continue to climb. Bernstein echoes this view, telling Investing.com that it still believes "demand destruction in the consumer segment will eventually happen," even as server demand absorbs additional supply.
Bernstein expects memory-price increases to slow before prices gradually peak and begin normalizing from the second half of 2027 into 2028. That timeline aligns with the view that the current upcycle may have a defined horizon, even if AI demand remains strong.
AI vs. consumer: a tale of two markets
Demand destruction in smartphones and PCs doesn't automatically end the memory upcycle. For investors tracking Micron, SanDisk, and other semiconductor names, the key distinction is between consumer and AI-driven demand. AI customers are less price-sensitive because memory is essential to deploying valuable computing infrastructure. Consumer buyers can delay purchases, choose cheaper devices, or accept lower specifications.
That difference is already reshaping the market. IDC senior director Nabila Popal told The Verge that memory prices could eventually stabilize at a "new normal" that remains at least three times historical levels. The Verge also reported that smartphone and PC makers are shifting toward premium devices, raising prices, or reducing memory configurations to protect margins.
For Micron and SanDisk, the key question is becoming the mix of demand rather than demand alone. As long as AI infrastructure spending remains strong, weaker consumer volumes may be manageable. But if smartphone and PC demand deteriorates faster than data-center demand expands, elevated pricing could eventually work against suppliers. Investors should watch for signs of demand destruction, as highlighted in analysis of Micron's AI growth trajectory.
This article is for informational purposes only and does not constitute financial advice.
