Odd Lots - Ray Wang on How AI Is Causing DRAM Prices to Surge

Episode Date: February 16, 2026

For years, DRAM -- or Dynamic Random Access Memory -- was kind of a sleepy, commoditized aspect of chip industry. Growth was steady, but modest, and prices just generally drifted lower. Suddenly all that's changed. AI has created voracious demand for DRAM and consumer facing companies are being forced to either curtail supply or raise prices due to exploding costs. But what is it about AI that consumes so much memory, and when will the market rebalance itself? On this episode, we speak with Ray Wang, an analyst at SemiAnalysis, who recently co-authored a report titled, Memory Mania: How a Once-in-Four-Decades Shortage Is Fueling a Memory Boom. We discuss the implications of this memory boom, how producers are responding to surging prices, and whether or not the Chinese companies in the space can catch up to the Korean giants, such as Samsung and Hynix. Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the Odd Lots podcast on Amazon Music. Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, you know what I'm worried about? I don't know if I'm worried about it, but it kind of feels like the direction things are going, which is that like all... energy, industrial commodities, anything that we use for any purpose is just going to, like, feed the AI beast. And us humans, we're just going to get left out in the cold. They're like, nothing for you. We got to like feed. We got to feed it all to the AI.

And maybe in 10 or 20 or 50 years, the AI is so powerful to just decide, why do humans get any of this? We just, we should keep it all to ourselves. A legitimate concern, I would say. I mean, to some extent, we are already seeing this. crowding out effect, right? So energy prices in certain areas have been going up. And most recently, memory chip prices. So this has been all over earnings recently. You had companies like Apple saying that because of a crunch in memory chip supply, they might have to either raise their prices or like cut down on the amount of phones they use. Nintendo. Like if you pull up a chart of Nintendo shares right now, they are just getting hammered. And supposedly it is all because of this

memory chip shortage. By the way, do you remember, do you remember like buying your first PC in like, you bought one before I did, I think, but mine was in the mid-90s? Yeah, yeah. I think that's about when I got one. Do you remember how much memory those things had? Oh, like nothing. Yeah. Like, I looked it up, something like less than 10 megabytes for a bunch of them. You know how much PCs have nowadays? Actually, I have no idea. I think it's, let's see, 16 gigabytes. Yeah. Isn't that crazy? It is really crazy. I remember, like, do you remember zip drives? Yeah, oh my God.

And there were all these special, you know, obviously various memory peripherals that you could buy and they came and sort of dedicated cartridges and stuff like that. I think they were called zip drive. Yeah, I think, right? There was zip drive. I don't remember. Yeah, yeah. That's right. Buying additional memory storage, et cetera, used to be this big part of the consumer process.

I'm actually glad, you know, my son really wants Nintendo. But if they can't produce them anymore because they can't. at the memory, then I'll say, sorry, no video games. That's so mean. You're going to have to sit them down and be like, I'm so sorry, son. There's this thing called a supply shortage. I'm going to use this as a learning opportunity to explain how global supply chains actually work. Totally. You know what the other? The one interesting thing is, if you look at spot DRAM prices, which we have on the terminal, this is, I think, maybe the interesting dynamic. There's a lot of

AI-related things on the terminal that have been surging for several years, most notably some of the big chip companies and video, et cetera. If you look at a chart of spot DRAM prices, the big surge wasn't until late last year. And since then, since then it's gone nuts. So for a long time, even as this AI story, the AI meme, the AI industry, like propagated, people were really paying attention to that area. And then suddenly it's just gone like, you know, the haywire. Haywire, yeah. And so obviously huge supply demand and balances. We need to understand what's going on because I think the stakes are, you know, it's getting so much. As you mentioned, a lot of companies are, losing out pretty big. Others are making a lot of money.

Yeah. We sort of need to get a handle on what's going on with memory. Let's do it. I'm really excited to say, we really do have the perfect guest. We are going to be speaking with Ray Wong. He's an analyst at semi-analysis. And he's recently published a brand new report on exactly this topic, talking about a memory super cycle and so forth. So truly the perfect guest, as I mentioned. He comes to us from Korea. Ray, thank you so much for coming on odd lots. And nice to be me above and thanks for having me. So many questions. Really appreciate you joining us. Let's just start with the basics. Like what is it about AI or what is going on? What is the core idea such that demand for memory in various forms is absolutely seemed to be booming right now in a way that

must have caught the supply side of the equation very off guard. Yeah. I think, you know, to really look at kind of the sort of imbalance supply demand dynamics, really we want to look at like, you know, what happened a few years ago, right? Because, you know, your capacity to check, like, your investment a few years ago. And what's happening, you know, like in 2020, 23 and 24, it's sort of a down cycle, right? Because remember, doing the COVID, all the companies are trying to flock in to buy tons of DRAM. Right. And, you know, there's a lot of purchases there, right? And there's sort of like up cycle, right? But it's like a very, very short up cycle. Because, like, when the COVID gradually getting better, right, you actually don't need that much DRAM. And back then,

the company will be like, hey, you actually don't have a sustainable demand, right? So they don't want to over-invest to expend their capacity. And when you're going to the down cycle, your CAPEX typically being very constrained, a company from their perspective, they try to be conservative. So that leads to 2024 and 2025 that your incremental way for capacity, that goes through DRAM is actually quite limited. But what's happening on the demand end is actually the demand was accelerating so fast, right? You know, one way to look at it is to get a media earnings, right?

And if you, when you're on one side, you demand us asserting so fast. On the other hand, on the supply side, your supply just couldn't catch up. And there's more nuances behind the supply, right? Because before, they are just supplying all the commodity derend, like DDR, LPDDR, all the memory that goes to PCs, goes to laptops, goes to your mobiles, goes to Nintendo switches, right? But, you know, what's happening in, you know, in this AI is like there's a new thing called HBM. Think about it's like a specialized memory for directly for AIRRRR. And that memory is extremely DRN way for intensive.

To give you a sense, right, you know, on the same way for a basis, you can produce three more bits if you do commodity DRN, but you can only produce one bit of HBM, right? And that ratio will actually go in higher when you go to HBM4, HBM5 in the next few, years, right? So in that way, on the same wafer basis, you can only produce that much HVN. And right now, what's happening is like, hey, this HBN is super, super profitable, and why now we dedicate more wafer for HBN? But so here's the problem, right? You only have that much wafer and you try to do everything. So that's quonding out a lot of the supply going to the commodity DRE. So we have sort of both things is happening and essentially comes down to like,

I think really, you know, things start really kind of people aware. It's like, probably Q2, 2025, that people realize, hey, like, you know, we actually couldn't buy enough, like, enough DRAN, both enough commodity DRM and also HBN for their demand. So you mentioned the C word just then. Oh, wait, not that C word, commodities. You mentioned commodities. And when I'm reading these articles about a memory chip shortage, people use commodity type language, right? So you hear super cycle a lot. You hear commoditized chips versus, I don't know, other types of chips? Are they customized? I don't think so. But anyway, how much does this particular industry actually resemble a commodities-like industry?

And then maybe explain a little bit more why historically it has been really, really cyclical. Yeah, so I think a couple of reasons, right? You know, fundamentally, the sort of the cost per bit for D-Rand was actually coming down every single year significantly. Right? Even in the most recent year, it was also coming down, but the extent that they are coming down for every single year is actually slowing down, like, you know, over the past like 10, 20 years, right? So the cost was key going down, right? So the cost is hard to become like, you know, the most competitive part, right? Another thing is there's the, you know, there's a sort of committee that set up the standard for DRAM, right? So, well, you are doing the similar products, right? You're just having, you know, oh, this is kind of a little better power efficiency, the performance was. a little better right here and there. So like it's hard for, you know, memory supplier to significantly differentiate their products compared to their competitor, right? So essentially,

what's the things that will compete in the end will be the market prices, right? And then if you are selling the similar products and you are targeting similar audience, right, that sort of like are the commodity, you know, sort of semiconductor commodity products to me. And I think those are the two main characteristics I'm seeing for DRM. And I think that's little different for HBM. Tell me, explain this. So there's commodity DRAM and then there's HBM.

What, HBM is a type of DRAM? Is that what you're saying? Yes. Can you explain this further and like sort of, yeah, walk us through what the commodity version and why there is this thing called HBM high bandwidth memory, what that's all about? Yeah, yeah. So essentially the emergence

of HBN is really go down to a kind of model layer because you know, this is when you like try to skill and try scaling your AI model, right? Your thoughts is increasing significantly every single year, right? Because your compute was increased a lot faster. But your memory bandwidth was actually sort of, it's increasing, but it's very limited, especially if you are using the memory from kind of traditional commodity DDRN,

that the bandwidth is actually limited. So from memory supply, they are thinking, hey, like, how can we expand the bandwidth to supporting the memory that's going to scale the AI, right? So that comes out to HBN. So the way they do HBN is, so they are stacking, multiply 8 or 12 or even in your future 16 D-REN dice together, right? So that making you essentially having higher bandwidth and have enough capacity to support AI developments over the past few years and in the next few years. And that's very different, right? You are stacking all this dice together compared to, hey, we just have like one D-RAM products as a chip, right?

And also that also comes down to a point that HBN manufacturing, also the packaging, but both front end and back end, it's a lot more complex compared to commodity DRE. And that's why I say, company DREN is more like commoditized, but I think HPN is less so because it's a lot more complex, right? And for supplier, you can actually differentiate either from the front end or back end technology. And when your yield is better, right, it gives you a better margin, better ability to compare, compete with your competitor, right? and, you know, stuff like thermal, things like that,

is the thing that will really stand out, right? And that's very different commodity theorem. Getting more and more layers on HBM, it kind of reminds me of the Razor Wars where, like, you know, Gillette would unveil a three blade thing. And then the next day, someone has, like, 12 or whatever. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute.

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So if I'm a company like Nintendo, how am I actually purchasing chips? Because I think this is going to be important when we talk about what's going on right now. But do I have like a forward contract with a major supplier or do I have, I don't know, a warehouse full of chips that I bought previously? how do they actually manage that? So there's a couple ways they do it, right? They will do it in terms of like they will do a different way, like different environments and also different vendors, right?

So it's hard to say like, hey, this is exactly the way they do it. But typically, I think you can think about like, hey, this is a month of the chips we're going to purchase in the next four months, and this is a month we're going to commit, right? And we're going to sign the contrary pricing, whether this term will be full months or for the LTA, you can go as long as like to a year or even two years, right? So that's typically the way you think about it.

But typically you'll be like, hey, we signed this contract for four months, right? And by the end, sorry, for three months for a quarter, so by the end of that quarter, you negotiate the new contract pricing for the next quarter. So that's typically the way it work. But, you know, the problem for right now is for consumer electronics. It's like the pricing probably sort of, I will say, secondary. Because if you couldn't secure value, you couldn't even make any money, right? So number one is secure in value, whether that, you know, make sure that fits, to the demand outlook, you are seeing.

Two, it's whether you can negotiate the best pricing you can. But given the overall pricing environment, so it's still volatile, was so asking so much, it's hard to, like, not taking some kinds of marching impacts because essentially, you know, you try to get the chips, right? And you cannot just, you know, get too much away from your vendors. Yeah, I want to get more into the demand destruction element because I think this is very important to think about where the equilibrium is going. Just to clarify,

is it about AI specifically? Is it in the training? Is it in the inference? Where specifically in the process of building out AI services does this voracious demand for DRAM come from? So honestly, to be very honest, I think it's everywhere. Like, right, you know, AI training, your need tons of HBM that just everyone knows, right? You also need a lot of the CPU DR. And that's LPDDR and the DDR that goes to the server. You also need HBN, right? So that's on the training part. In an inferencing, you also need HBM, right? And you also need the CPU DRA and the go through those workload, right? But the main one will be the HBM.

And even the inferencing, right now they are separating to pre-fill and decode. And, you know, I think 80%, I think right now, the most important thing will be decode, right? And decode is super, super, super, memory-bound and memory-intensive. And HBN and memory importance of there was just will only increase to my understanding, especially given the long-contest window continue to expand, and the inference usage and adoptions continue to going up, right? So I think those are typical way I would think about those, right?

And the last thing is I think a lot of people talk about this day is about agentic AI, right? Agentic AI, you want to power those. You need a lot of CPU, you know, a lot of CPU-based server, right? So what's including the CPU server? There's a lot of theory in there, right? And a lot of agentic world law also means you need a lot of inference as well, right? And they go back to my previous polling.

You need a lot of HBO and D-Ren. Right? So I will say like kind of D-Ren and I got HBN and D-Rine is kind of everywhere. And we can kind of talk about storage by storage or so everywhere, you know, in doing this process. I have a basic question. But why does AI need a lot of memory at all? So you just explain, you know, it's important for inference. It's important for training, whatever.

But like, why? Yeah. I think this needs to like goes down to the to the model that later. Because essentially when you try to train, let's say you want to train the model, right? And then you need, you just need to pure tons of data. You need to restrict tons of data there to train your model. And then for the inferencing part, like you need one data after another to kind of compute one after another sort of chain of sorts, right? So to do that process, how can you keep the previous data, your process, to keep it in there and to process to another data that's coming out after, right?

So that's why you need not of memory. Then go back to my previous point, right? The long-contest window basically means like when you're, when the things that you are processes longer and longer, right? Like, how can you have enough memory to process those, right? And, you know, one of the good example, if you use trigibati. You guys definitely remember, right? You know, back to trade-d-b-tis which starts coming out.

People are just like, hey, like, what's the word? Right. Write a poem. People right now is stored last year. People are doing like, hey, can you write a 20-page report how cancer can happen on people, for example. Then we'll give a 20 page report and they will wait like five minutes, right?

And so if you think about the process, like they do all the calculation, all the researchers, and also give you the output tokens that the answer you get from your prongs, that's significant way longer than the prongs that you are given, right? And that's also a lot longer response

that you are getting when you go back to the GPD3. And remember, the usage we know back to GPD3 was, I forgot the monthly, daily users. But right now it was, I think the user for ChGPD was 800 million, right? And we are not included the users for the germany, for cloud, for XAI, right? So if you multiply those effects, I think the memory demands very significant and it's very clear to me. Yeah, it's really interesting. I saw some people were talking about this, but it really strikes me in my own usage of AI,

just basically how much more I use it as capabilities have grown. Like it was sort of cute in late 2020 is like, oh, get it to write a poem about this. And it's like, okay, and then I would go, you know, several weeks sometimes without having anything to query. And then, you know, these days, like, I'm using it all the time, like trying to do things with code or scrape data, et cetera. So overall token consumption has grown massively with increased capabilities. All right, let's talk about the demand destruction element.

Any commodity is going to be, the price is going to be. the price is going to be a function of supply and demand, and eventually prices get higher enough such that certain forms of demand just are no longer economical. And it's like, you know what, we're just not going to make as many video games or cameras or whatever else uses a memory. Are we starting to see any of that yet, such that certain uses and consumption of memory.

So Joe doesn't have to buy a switch for his son. Yeah, that's right. Yeah, I actually bought a switch recently. So the price has, I haven't you, Are you going to resell it? I don't know. We'll see how the operative operates there works.

But I think we're already seeing a lot of impacts, actually. But you kind of vary in different kinds of problems, right? In PC, you are showing that. Dell, Non-Lauvel, answer, or suits, they are all having a price hike for kind of different their problems, right? And, you know, on the kind of demand side, you're also seeing that, I think,

for the Chinese smartphone market, right? A lot of the analysts, a lot of the research firm, right? A lot of the company was saying, like, they are cutting off their smartphone outlook. For example, I think media tech recently that for earnings, right? They are saying they are cutting off the mobile to, I think it was 12 or 10 to 15% of the 2026 outlook. That's very significant, right? You're saying this year's supposed to be 100 million, but it will essentially go to 90 million, right? That's very significant. So I think we are already seeing that, but kind of very different places, right? Apple will be a great example here because they are saying, hey, like,

like, hey, we have all the price hike, right? But we actually manage pretty well. They are saying the real sort of meaningful margin impact will actually show up in the second half, 26, instead of like the first quarter or second quarter. I think those sort of the things I'm seeing. So it's definitely already showing out in the market, right? I think what you can expect this year will be two things.

One is sort of demand destruction in PCs, right, the border consumer electronics, or the dispeck, whether it's a memory display, that's very straightforward, but also the camera, right? The camera is also very important. I'm hearing some of the display on the camera as well. And, you know, also on the sort of what we call a delay launch, right? Because you don't want to launch your new products that have higher price than the initial

assault, which will impact your new launch performance, which usually the new launch product have better ASP, better margin compared to your previous generation products, right? I think those are the things we're going to see in the coming months, in the coming quarters. I think it will show impacts and people will start filming it. Joe, do you think we're going to get people like stripping old Nintendo's for memory chips? Like remember how during the commodities super cycle in like the early 2010s, I guess, there were all those stories about people like stealing electricity wires and stripping them for copper. Yeah, it happened to get in 2021 too, I think. Yeah, we might get some of that.

Well, actually, on that note, is there like a short-term fix for this problem, either in terms of design? Maybe you can make the products more efficient in some way so that it needs less memory or recycling old memory chips. I don't know. Yeah, I think, you know, from the demand side is a lot difficult, right, from an OEM perspective, right? There's only that much you can do, right? You can dispeg, right? But I don't think that addresses the fundamental issues, right? You are just dispeg your products and so you can ship.

But there is double-hsword, right? When you downgrade your products, that actually look back compared to some of your peers, who doesn't dispeg and make your product less competitive that impact your final sort of quarterly or annual shipment. I think what needs to be addressed where what can be down is probably on the supply side, right? So supply side, we mainly talk about a couple of vendors, right? The micro-hynics, Samsung, and for the legacy ones, right,

you have windbound and Nanya and China have like CSMT and GHICC, right? Those people. So I think the most direct way right now this year, because this year, the really challenge is there's a clean room constraint. So clean room constraint is basically you have limited space that you can put all the equipment and start manufacturing chips in the fat. So you have clean room shortage in all three major memory makers, right? So your incremental wafer capacity coming online for 2026 will actually be quite limited. So in that sense, how can you produce more bits, more DRAM bits, while

having only limited incremental wafer capacity? The only thing you can do is not a number. migration. So in the Dero process now you have the most advances right now is one C, right? Going down, I have one B, one A and one X, blah, right? And, you know, I think right now they are trying to do is migrate as much as they can to 1B and 1C, which on the same way for basis, they all produce a lot more chip, a lot more bits compared to a legacy not, right? So doing that way, on the same way for basis, you can produce more bits. So that should produce more support. even though your wafer capacity is constrained. But the challenge is two things.

One, how fast you can run about this non-migration, right? Non-migration is typically difficult. What I would say difficult is, you know, it takes time, right? For going to the most events now, right? You need EUV machine, right? You need all different kind of manufacturing processes, right? And not every fact can already prepare to doing that, right? So it takes time to rent out all those production for the new events not.

also you are having the challenge to like, hey, okay, I want to do that migration, right? But how are we going to balance the capacity with HBN? Again, that's another issue you want to kind of think about it, right? Because some of the HBN process now is actually using, for HINX, they are using 1B. So that's actually the events process now, right? So even you are including 1B, by your, at a time, you want to do more HBN. So, like, the increase there is actually quite limited. So I think it also the way can potentially fix the issue, but, you know, from our house view, right,

even we factor all those in, I think this year we're still going to have quite significant shortage. One of the themes that comes up when we talk about any commodities super cycle is that sure, higher prices will eventually elicit more production, more supply. But in the meantime, you know, there's a sweet spot for the existing producers, especially when you have just a small number of producers that can produce at scale. They enjoy massive profits, right? And they're sort of going to be reluctant to build out new fabs because that's much. money going out the door. It also means lower prices. So there's always this sort of Goldilocks

period for them before the supply comes online where they're just raking in profits. What do we see is the industry's impulse to invest? And I'm curious, like, you know, whether it's Chinese producers, are they in a position to potentially undercut the profits of the Korean makers? Are the Korean makers seeing themselves as having a long window where they can enjoy large profits before they have to invest? Like, what is the thinking on the supply side about those big capital outlays? Yeah, that's a very good, like, strategic question. I think, you know, every management will probably give you a sort of different answer

or kind of on a high level, probably same. But I think in general, right, like, you know, look at like historical cycle. It's like, you know, if we are seeing quite sustainable demand in the next few years and then clearly the capacity couldn't catch out of demand, they are going to expand the capacity in some time, right? it probably not going to be like, hey, we announced in 2026. The capacity really coming online, like meaningfully, it's probably 2028. So I think they will still announce, right?

And we are seeing that from micro, right? Well, Micro is announcing a new NEMFAP in Singapore, right? They are expanding, they have two fab. Currently, it's an only construction in the U.S., right? Also doing tons of non-migration and recently acquired the new Fad from PSMC, which is a Taiwanese chipmaker. And then all those moves, you are already seeing some sign of that. And another side you are seeing it's the CAPEX, right?

Both the Hynix, Samsung, and Micro, their DREAN CAPEX has actually increased quite significant this year and expects similar trend in 2007 given, I think, you know, they're going to probably try to expand more capacity and invests more in both HBN as well as the equipment that goes through advanced equipment, right? That goes back to the point. I was talking about the non-migration. If you want non-migration, you need to use more advanced equipment to produce more advanced shifts. Yeah, it really does remind me of the oil industry, right, where like there's a bust in the underlying commodity price and everyone starts talking about being disciplined on CAPEx spend. And so it takes a while to ramp up. I wanted to ask about, I guess, the balance between HBM and other types of DRAM. How are people or how are the actual chipmakers thinking about that? And is there is there a chance that because HBO, my understanding, is that,

it has higher profit margins. Is there a chance that everyone just pours into HBM and kind of leaves the more basic stuff in the dust? Yeah, so actually, you know, it's very interesting. I think what probably thinks Focchio, where you wrote about this for our institutional client, it's that, you know, the margin, well, typically we think HBO has higher margin, right?

Which is definitely true. But what's happening, you know, we see all this spot price, country price, going out so much, right? The margin of the commodity right now is actually higher than HBN. So that created a real dynamic that Tracy that you talk about it. Because when your margin of commodity rate is actually going higher, why we should make more HBN? Like why, right?

But I think if you really think about like a long-term perspective for a memory supplier, right? Before the old air balloon, your demand is really driving from a couple A market, right? PC, mobile, automotive, industrial, blah, blah, blah, right? HBN right now is search as a new growth driver for the company, which we believe will last for the next few years, right? And for the memory supplier, they're thinking the same. And if you are now continuing to push your capacity, push your technology, when you're lagging behind, it's hard to coming back. And they go back to my previous point that this is an area that is relatively easier to differentiate your products to get more market share more manifoldly, right? So I think three memory makers are memory value HBM, even though right now the margin of

commodity D-Rang is higher, right? I think they will still invest quite a lot on HBM and they will do their best to sort of balance the commodity D-Rand market. But I think, you know, I think this year, at least the number I'm saying, it's still quite significant shortage. How do the Chinese producers compare to the Korean producers? Is there a gap? Oh, yeah, I think there's definitely the gap.

I think, like, you know, if you look at the memory in general, I think it's probably three years. Three years to say. And it's probably four years, I would say, that this is very like, you know, time. This is like kind of a stuff today, you know, who knows what's going to happen in the future. But I think, you know, there's definitely a gap. You know, when I think about the competition pressure from Chinese memory makers, we always want to kind of separate the Chinese market and also the ex-China market. Let's also the memory supply was looking at it, right?

So Chinese market is probably about 25% of the global demand demand. So really, the competition is happening in China because for the leading Chinese memory supplier, like CSMT, for example, I believe like 90% or 95% of the revenue is coming from China and Hong Kong. So meaning, you know, most of the DRA is really competing Chinese market, compete with micro, high-endx and Samsung. I want to say that right now on the events, on the high end, right, I think it was still dominated by streamer memory makers. But CSMT are getting too momentary, right? they are probably getting sort of a low-end and Miam products. And they are also benefited by Chinese government's policy in terms of the self-sufficiency drive to, you know, whether it's for the commodity DERN, also right now they are pushing for HVN developments that support Chinese AI hardware. So if there's a shortage, and it seems like the shortage is going to be with us for some time, how are the chipmakers actually allocating what supply they have?

Does it go to the company that I think is going to be really big and important in the future? Like, I don't know, an open AI or something. Or does it go to an existing customer that's been buying in volume from me for years? Yeah, I think there's no doubt to me that, you know, some of the highest tiered customer will get a value for sure. Of course, there is some more complex pricing negotiation behind. But I will say like the value in would be, still be the most important thing. And I think that's probably what they're going to do, right? And, you know, besides thinking about like a buy customer, I will think about kind of buy sector.

I will say the server DERN and HBN, two things together will be the top, top priority. Because, you know, for the whole A market in DERN, we are seeing actually HBN and server DERN together, it's probably like more than half of the DERN market, right? And that's important. And it's going in so fast, right? And it's unlikely mobile, right? mobile is kind of flat. The mobile demand is really driven by the increased D-Rang contents in the mobile,

which is quite limited, right? If you buy an iPhone over the past year, you know, like they are actually quite limited on their D-RN content increase. So I think, I think, you know, those are the top two priorities for the memory company to focus on in the next two, three years. And we'll see what happened, you know, after like, you know, second half of 2027 or 28 if there is some structural change. But I think server D-RN HBO will be the top priorities.

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but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading by Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcast. You know, the other day, I was very lazy. It was just not rare for me. Just that one day.

Just one day. And I used Claude Code. You know, I have a bunch of screenshots on the desktop of my computer. And it sort of makes my desktop it look like a mess. And I can't see folders. So I'll like drag and drop them and put them in the recycling bin. And it was very lazy. And I put it to Claude Code.

I said, clean up my desktop. Clean up my desktop. And I was like, this is so insane. I'm using, you know, Anthropics computers, wherever they are on the other side of the country, to clean up my own computer's desktop. Why do I even have my own computer? Did it do a good job? Yeah, of course. Yeah, it did great. And I was like, why do I even have my own computer at this point? I started wondering, you know, I'm like, why do I even have a computer? Could it, and so related to this sort of

DRAM question, could we just get into a situation in which people don't really have their own compute on their own device because more that like Anthropics brain is sort of, or open AI's brain is sort of controlling the things we use, why not just have a very low spec computer or low spec phone or whatever or, you know, low memory, whatever, because I'm already using their computers, etc. And are we just going to see whether memory or elsewhere, this sort of migration where all of the interesting stuff and all of the memory and all of the compute happens elsewhere? and my phone just becomes a sort of, you know, or my computer just becomes a screen with an internet access.

Yeah, I mean, I don't know about the idea, like, you know, not having the personal devices. Yeah, I might like have a physical device, but it just sort of seems similar. Like, over time, does it make sense for me to have all of this actual compute inside my house when I'm just like, oh, might as well let them have it all. Yeah, I would think it depends on, like,

what's your end purpose, right? you know, for example, laptop, for example, right? If you're doing, like, video editing, very, man heavy, right? You'll probably still a lot of, you probably still need quite a lot of D-Rand, right? If you're just, you know, doing, like, you know, document work, right? How cold depends on how are you going to use it. If you're using, like, super intensively, I think you still need, like, quite good D-Rand, especially you are, like, pulling all different API from different places, right?

So I will say it just really depends on the end-purpose. I don't think, like, you know, at least I haven't seen, like, you know, there will be, like, kind of structural sort of de-rent destruction in the devices. from a gentling AI. So going back to the beginning of this conversation and the cyclicality of the industry, people have been throwing around the term super cycle, again, very commodities-esque.

Is this just a super cycle, you know, maybe bigger than a previous turns that we've seen throughout history? Or do you think something structural has shifted here, perhaps given the rise of AI and the fact that Joe is, you know, using Claude to clean up his desktop? This is actually very dangerous question.

You obviously asking whether this time is different, right? Yeah, right? I think, like, you know, I think there are a couple of things that actually runs with the history, right? The non-migration, fat capacity, right, those things. But I would say, like, you know, there's kind of a different thing I'm seeing, right? Because we really see in a sort of super cycle that there's a new demand driver coming online. it's not only constrained the demand, this thing is also constrained the supply, right?

Because, for example, in 2010 to 2012, there's a super cycle driven by mobile, right? So mobile is basically, hey, we have a new product coming online, and it requires a lot of DRAN, and our capacity couldn't catch up. But right now for HPN, it's like, hey, okay, we need to do HBN, but your HBN is actually constrained your commodity

deranged capacity. So I think this is the key difference that we are seeing for this, right? Apparently, the demand accelerations is also last quite long, right? If you really start counting the sort of, I will say, the AI acceleration in terms of demand, probably let's say second half of 2023 when Ambidia really start kind of emerging in people's attention. Let's like to now, it's almost probably like, let's say, three years, right? Two year and a half, two years, three years.

And we are looking at this cycle to last until, let's say, you know, safely to say like second half of 27, right? So we are looking at like kind of four-year cycle. That's quite rare in the history. The usually, like, the cycle, if you look at historically, for the memory, it's probably like 15 months, like the probably longest, like 18 months from start to its peak. But right now, we are going through an area that was like, hey, the demand was going up. Not a price directly, but the demand at least was growing quite significantly over the past few years, right? And the pricing impact is happening right now starting from probably Q2 2025. Well, what did, when you say, okay, the cycle could end by 2027, or are there?

the second half of 2027, what are the ingredients for it to slow down? Is it the more production capacity? Is it a slowdown in total demand? Like, what do you see potentially happening in 2027 that brings supply and demand more into balance? Yeah. So I won't say like it will end. I will say like it's a more tricky area to sort of.

Because, you know, based on the number, you know, I'm modeling, we are seeing here. The demand is actually going higher and the shortage is actually going to worse. And the power of that is because a media's AI server, their Deerun content was going to 3x compared to Gregmo. Right. And then what kind of server? Oh, an Nvidia server. No, Ruben 200. Yeah.

Okay. Sorry, looping Ultra. Sorry, Looping Ultra. Loving 300. Okay. And if that's the case and the demand was continued to be that strong, right? Your XPN shortage should even be worse compared to 26. And your deer should go worse, right?

Because the memory record is going to try to make more. HPN wafer, right, and that kind of counting out more on commodity DRE. I think the reason I say is more tricky because two things. I mentioned about a lot of non-migration. It's actually happened this year. It also going to happen in 2027, right? So tons of non-migration are going to come online and have been completed. So then we'll add a lot of additional bits for the memory supplier.

Additionally, the wafer should have a lot more coming online by the end of 26 and for, you know, throughout 2027, right? So I think those are two variables that you want to factor in. From what I'm saying at least, I think like 2027, you're going to still be shortage. Yeah. We need a strategic memory chip preserve, right? Put a floor on prices in the cycle.

Actually, on that note, do you see a lot of stockpiling in the market or panic buying right now where people are seeing these forecasts and they're freaking out and just buying whatever they can? How you get a bullwhip effect. That's right. Yeah, it's hard to say no, right? Like, one of the good, I think, in the signal, you have seen in tiny Samsung and Microin, the Deerre inventory was dropping every single quarter since, I think, Q3, 2025.

And I see that's just one other signal that you are not just, you know, buying the sort of products on the shelf, right? And then the products are coming online in that quarter. You're also buying the products in their inventory, right? you are trying to get as much of the product as you can. And, you know, given all the demand and how AI has developed so fast, like, by monthly basis, it's hard to say, like, hey, there's no pre-entive purchasing behavior happening, right? And especially when the hypers and the leading AI labs, they are competing with each other very intensively.

Securing capacity on the hardware is sort of the baseline, right? You want to get the best equipment that you can compete, right? So obviously, if I'm buying a Nintendo Switch or if I'm buying a PC or maybe some sort of consumer device, then the increased memory cost is a meaningful driver of that. And maybe, you know, the company who have to raise prices and maybe I won't buy it or whatever and you might get this. What about like for the big hyperscalers, when we see these huge capital expenditure numbers from the likes of a Microsoft or an Amazon, do these prices, changes move the dial at these levels? in terms of, do they affect anything when we're talking about these buyers? Yeah, I don't think, you know, number one for sure. I think the CAPEX is not really, well, the CAPEX increase is not because of the DRA price increase.

Sure, yeah. But the new rate price increase, thus going to have some kinds of impacts to their purchases of memory, right? Assuming the hyper-skillers are the direct buyer of the memory, which, you know, is not necessarily the case in kind of different locations, right? So if they are the direct buyer, so for your memory, for sure, right, if your initial goal was using 100 million to buy a certain amount of memory, right now you probably need to do some discount there for sure, especially this thing that's probably going to, the discount going to be more and more in the coming quarter, right? So one of the thing they are trying, and they are hopefully they are trying to do, but they

are still very difficult, is like they try to have a long-term agreement, right, to commit large value for the year basis and to hopefully to have better pricing. But it's really hard to, you know, to achieve that because why in the memory supply I want to do that, right? We can negotiate the pricing in a coding basis. We can actually get more money, right? And especially given the current pricing and supply demand environments. Ray Wong, thank you so much for coming on Adla. It's really the perfect guest.

Let's stay in touch and maybe we'll revisit it in 2027 to see if things have eased. Yeah, hopefully. All right. Take care, Ray. That was great. Take care. Thank you. Tracy, that was fun. I do feel like there's a lot of moving pieces there, but just from AI in general, the crowding out effect is such a big part of the story.

When you saw those big capital expenditure plans for 2027, like, these are real macro drivers. They're going to show up in CPI, et cetera, like that. And because it's like, you know, maybe we'll get a lot of productivity gains in the future. But right now the pace of spending is so furious, it is like a fiscal boom. Yeah. I mean, this is what happens when some of the world's biggest companies and most cash-rich companies decide that this is an existential threat, right? There's no upward limit on how much they're willing to spend in order to survive. And so you could just throw money at HBM chips, I guess.

And then you get the chip makers going, well, actually, like, we want to produce a bunch of HBM. Like forget about tram, all of that stuff. I do think, like, yeah, you know, when it comes to some of the data center and energy stuff, you know, it's a little ambiguous how much it's affecting energy prices right now. But already the politics of that is very fraud. And then you're going to start upsetting the gamer community because they can't get, you know, Nvidia has talked about curtailing some of it. And then they're going to upset my son because he can't get a Nintendo Switch, et cetera. people are just going to start feeling it more and more, this sort of visceral reality, that various resources that they thought they could get abundantly.

It's like, nope, we've switched this line over to the data center, over to AI, and it's going to become more, this crowding out effect is going to become more and more real to people directly. Which is so ironic, because when you think about AI, you know, it's this thing that exists in the ether, right? But at the same time, it has this huge physical impact on the real world. It's kind of funny, and I guess, like, not what a lot of people would have expected. No, I suppose not.

The DRAM, people, if you, anyone who has a terminal or just should just look up DRAM prices. I thought you were going to say anyone who has a terminal should start stripping out their memory checks. Everyone who has a terminal should just unscrew the back and pull out the DRAM. No, but if you have, people should just look at the chart because it really, here is this thing that's very sleepy. I mean, this was true commoditized tech, you know, this was the low end in terms of what people were excited about in chips and so forth. And as we mentioned in the beginning, you know, costs generally around this downward trend and so forth because growth was modest and technology continues to improve. And then it literally just looks like an L. Yeah. Really in like the last

four months just gone completely nuts. And so yeah, kind of a fascinating spot to watch. And it's just interesting to the point that you were making how much it really is like a commodity super cycle. Yeah. A commodity cycle. I, Well, I guess in 2027, maybe. We'll find out. We'll see if it balances out. Shall we leave it there? Let's leave it there.

All right. This has been another episode of the OddLots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill Wisenthal. You can follow me at the stalwart. Follow our guest, Ray Wong. He's at R. Wong 07.

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