I'm clinging to the hope that the memory supply crisis resolves sooner rather than later as much as the next PC gamer. Unfortunately, judging by how much of next year's memory supply has been locked down by long term agreements, it looks like things are about to get much worse before they get better.
80% of Samsung's 2027 memory output has already been secured by long term agreements, according to Korean investment firm KB Securities (via Yonhap News).
Hyperscalers pushing forward with the big data centre build out will likely be jostling for the remaining 20%. As for Samsung's commodity memory output—your DRAM, your NAND, and so on—70% is already said to be covered by five year contracts.
Yearly agreements account for 100% of the company's High Bandwidth Memory (HBM) output (which is most often used by graphics cards and accelerators for data centres). As a result, KB Securities predicts that the average selling price for this specialised memory will increase by between 100 and 150% year-over-year. Bottom line, that will have a knock-on effect on the consumer market too, with a double-digit quarter-over-quarter price increase expected on the other side of the coming new year.
So, while it's one thing for the odd big tech CEO saying "It's impossible for the shortage to last until 2030," we do still need to make it to that ballpark year first. Unfortunately for this rapidly overextending metaphor, the field is on fire. If you've been camping out under the bleachers, trying to ignore how hot it's feeling, I recommend taking a look at our freshly updated memory crisis explainer here. Long game made short, yes, it is all AI's fault.
On the flip side for those so inclined, now might be the time to invest in Samsung as KB Securities also predicts "earnings growth virtually guaranteed." The firm predicts Samsung's operating profit to see a 57% year-over-year increase in 2027, reaching 555 trillion Korean won (or a little over $4 billion).
This prediction arrives in the wake of last week's big AI and semiconductor stock sell off. KB Securities note that Samsung saw a share price decline of 19% during this time, which sure ain't nothing!
This hasn't swayed the investment firm's prediction though, with KB Securities saying, "We believe the sell-off is attributable to weaker sentiment [regarding AI investments more broadly] and valuation adjustments amid macro uncertainties, rather than any deterioration in the company’s earnings fundamentals. Macro variables may boost near-term volatility, but are unlikely to affect the direction of earnings growth, given the output reserved by LTAs and rising prices. In short, we believe earnings growth in 2027 is virtually assured."
Well, that investor jargon is all very well and good for a massive corporation like Samsung. For the rest of us, I still don't advise panic buying hardware, but it does look like prices are only going to get worse in the near-term.
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