The rush for artificial intelligence has led to a severe shortage in computer memory infrastructure, turning this once low-margin sector into a highly sought-after market. In 2025, memory company Sandisk became one of the top performers on the S&P 500 after separating from Western Digital. Early signs suggest this trend may continue into 2026.
Hyperscale companies have significantly increased their demand, pushing memory manufacturers to their limits. Micron, another industry player, informed CNBC this month that it is already sold out for 2026. Memory costs typically make up around 20% of hardware expenses, leading to sharp price increases for others competing with hyperscalers.
Nintendo's shares fell sharply at the end of 2025 as memory costs for its Switch 2 hardware rose over 40% in the final quarter. Last week, president Shuntaro Furukawa stated the company must monitor the situation closely, though he did not comment on the possibility of raising console prices.
Sandisk split from Western Digital in February 2025, just as the boom began. The company now faces the challenge of investing in production capacity while maintaining its supply advantage.
Sandisk shares delivered a total return of 559% in 2025 after the separation, ranking among the best in the S&P 500. Since the start of the year, the stock has risen another 50%.
Sandisk executives told The Wall Street Journal last week they are acutely aware of the memory industry's history of boom-and-bust cycles. The company plans to increase capital expenditures by 18% in its current fiscal year ending in June, despite expecting a 44% revenue jump.
We need to get the economics right to be able to continue to invest that money and not go through these huge episodic periods of losing money, Sandisk CEO David Goeckeler told the WSJ. He suggested hyperscalers commit to supply agreements longer than three months at a time.
The memory supply squeeze has prompted some DIY PC builders to recall a prediction made by Jeff Bezos at The New York Times DealBook Summit in 2024. Bezos forecast that the personal computing industry might disappear as hyperscalers consume resources, with future consumers renting computing power from cloud providers instead.