The artificial intelligence boom is fundamentally reshaping the memory semiconductor industry, and investors may need to rethink how they value DRAM makers, according to a new report by Jefferies.
The brokerage says that AI has permanently altered the economics of the memory market, replacing the industry's traditional boom-and-bust cycles with structurally stronger demand driven by data centres, high-bandwidth memory (HBM), and next-generation AI chips.
For years, memory chipmakers were viewed as highly cyclical businesses, with periods of oversupply leading to sharp price declines and earnings volatility. Jefferies believes that paradigm is changing as AI workloads require significantly more memory per server than traditional computing applications.
The brokerage noted that AI servers use multiple times more DRAM than conventional servers, with high-bandwidth memory emerging as a critical component for advanced graphics processing units (GPUs) powering large language models. As AI adoption accelerates globally, demand for premium memory products is expected to remain strong.
Industry Discipline
Unlike previous cycles, memory manufacturers are prioritising profitability over market share, keeping capacity additions under tighter control even as demand rises. That supply discipline, combined with sustained AI investment, is expected to support healthier pricing and higher returns on capital.
The brokerage said the market continues to value memory companies as cyclical businesses despite improving fundamentals. It believes DRAM manufacturers deserve higher valuation multiples because their earnings profile is becoming more resilient and less dependent on traditional PC and smartphone demand.
HBM is expected to be one of the biggest beneficiaries of the AI infrastructure build-out. Jefferies expects leading memory suppliers to capture higher margins as hyperscalers and chipmakers increase spending on AI hardware over the coming years.
Jefferies maintains that concerns about an imminent slowdown are overdone, arguing that lower-cost AI models could ultimately expand adoption and increase demand for computing infrastructure rather than reduce it.
Within Asia's semiconductor sector, the brokerage continues to favour companies with strong exposure to DRAM and HBM, particularly South Korean memory manufacturers.
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