The extraordinary run-up in global memory chip prices that has defined the AI hardware boom of the past two years is beginning to show signs of exhaustion. According to new research reported by the South China Morning Post, institutional investors and analysts are warning that the memory sector is entering the late stage of its current upcycle, with slower price growth and rising supply from Chinese producers signaling a potential turning point for one of the semiconductor industry’s most profitable segments.
The warning comes from Morgan Stanley, which stated in a report last week that the memory cycle is set to enter its late stage in the fourth quarter of 2026. The bank cited moderating price increases and building inventories as the key indicators of a cycle shift. This assessment has already begun to weigh on the share prices of major memory producers, with Micron, SK Hynix, and SanDisk all retreating from recent highs as investors reassess the sustainability of the boom.
The data on contract pricing reinforces the concern. Bernstein Research noted in a report on Friday that conventional DRAM contract prices are expected to rise approximately 17 percent in the third quarter compared to the previous period. While that figure still represents growth, it marks a dramatic deceleration from the roughly 65 percent quarter-on-quarter jump recorded in the April-June period of 2026. The pace of price appreciation, in other words, is slowing sharply even as absolute demand from AI data centers remains strong.
China’s Memory Giants Are Adding Supply
The primary driver of the anticipated supply-side shift is the aggressive capacity expansion underway at China’s two leading memory producers: ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC). Both companies have benefited enormously from the AI-driven memory boom, and both are now plowing those profits into massive capacity additions that analysts believe will reshape global supply dynamics.
UBS projects that CXMT will nearly double its monthly DRAM production capacity, growing from approximately 240,000 wafer starts at the end of 2025 to 466,000 by late 2028. That expansion would lift CXMT’s share of global DRAM bit supply from roughly 7 percent to 10 percent. While a 10 percent market share may seem modest, the incremental volume represented by that growth is substantial enough to meaningfully affect global pricing, particularly if it arrives at a time when demand growth is also moderating.
YMTC, China’s leading NAND flash memory producer, is pursuing a parallel expansion strategy. The company has been aggressively scaling its 3D NAND production capacity, targeting both domestic Chinese customers and international markets where it has been gaining traction despite US export control pressures. The combined capacity additions from CXMT and YMTC represent a significant new source of global memory supply that did not exist at scale just two years ago.
The AI Demand Question
The central uncertainty in the memory market outlook is whether AI demand will remain strong enough to absorb the incoming supply. The bull case rests on the continued rapid expansion of AI data center infrastructure globally. Hyperscalers including Microsoft, Google, Amazon, and their Chinese counterparts at Alibaba, Tencent, and ByteDance are all investing at record levels in computing infrastructure, and high-bandwidth memory remains a critical bottleneck for the most advanced AI accelerators.
However, analysts are increasingly asking whether the pace of AI infrastructure investment can sustain the extraordinary pricing levels of the past year. The memory market is notoriously cyclical, and the current boom has been unusually prolonged by the simultaneous surge in demand from multiple end markets: AI servers, consumer electronics recovery, and automotive applications. If any of these demand drivers softens, the combination of moderating demand and rising Chinese supply could tip the market toward oversupply faster than current consensus forecasts suggest.
Implications for Chinese Chipmakers
For CXMT and YMTC, the timing of the anticipated cycle shift carries significant strategic implications. Both companies are in the midst of major capital expenditure programs, and their ability to fund continued expansion depends heavily on maintaining strong cash flows from current elevated prices. A sharper-than-expected price correction could force both companies to moderate their expansion timelines, potentially slowing the pace at which Chinese producers close the gap with global leaders Samsung and SK Hynix.
At the same time, the anticipated late-cycle environment may create opportunities for Chinese producers to gain market share. As CXMT’s recent inclusion in the MSCI China All Shares Index demonstrated, international investors are increasingly paying attention to China’s semiconductor champions. If CXMT and YMTC can navigate the coming cycle downturn while continuing to improve their technology, they will emerge as significantly more formidable competitors to the established global memory oligopoly than they are today. The memory boom may be ending, but China’s long-term ambitions in this critical sector are only accelerating.