Citi Forecasts Prolonged Memory Chip Shortage Driven by AI, Names Top Picks

Analysts at Citi have identified leading memory chip manufacturers set to capitalize on a structural demand shift fueled by artificial intelligence. The firm projects that the rise of "continual learning" in AI will drive a sustained market undersupply that could last through 2031.

AI to Drive Sustained Memory Shortage

Citi's analysis points to continual learning—an AI process that constantly updates models with new data and tasks—as a primary catalyst for memory demand. This process requires vast resources for both model training and the storage of previously learned information, boosting demand across High-Bandwidth Memory (HBM), server DDR5, and enterprise Solid-State Drives (eSSDs).

The bank forecasts that HBM bit demand will surge 62% year-over-year in 2027 and another 69% in 2028. This growth is expected to occur despite potential concerns over AI safety issues or changes in technical specifications.

Market Imbalance Forecast Through 2028

Citi anticipates that demand growth will significantly outpace new production, leading to a tightening market for both DRAM and NAND memory chips. The firm's supply-demand model points to a structural undersupply in the coming years.

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• DRAM: Global demand is projected to grow 30% in 2027 and 35% in 2028, far exceeding limited supply growth of 19% and 22%, respectively. This results in a forecast supply-demand deficit of -8.7% in 2027 and -9.7% in 2028.
• NAND: Demand is expected to rise 29% in 2027 and 33% in 2028. Supply growth will lag at 21% and 25% as manufacturers prioritize capital for DRAM and HBM production, leading to a projected deficit of -6.1% in 2027 and -5.5% in 2028.

Top Analyst Picks

Based on this outlook, Citi highlighted several companies as its top picks in the memory sector:

• Samsung Electronics: Positioned to benefit from the persistent memory shortage and the potential emergence of personal AI devices.
• SK Hynix: Expected to gain from structural growth in demand for both HBM and server DDR5 memory.
• Micron Technology: Anticipated to capitalize on what Citi describes as an intensifying DRAM market undersupply through 2028.
• Western Digital (owner of the Sandisk brand): Projected to see strong demand for its high-density eSSDs, driven by the storage requirements of continual learning.
• Kioxia: Expected to benefit from tighter NAND supply conditions as AI applications demand greater storage capacity.