Morgan Stanley reports that memory prices have risen more than sixfold over the past year, a shift that has seen older memory types squeezed out by the AI boom. Analysts warn that NOR flash, used for boot code in networking and automotive equipment, and SLC NAND, valued for its endurance in embedded systems, will remain undersupplied through 2026. Manufacturers are cutting SLC capacity because a 12-inch wafer devoted to mainstream NAND can generate roughly $20,000 in revenue, compared to just $6,000 to $8,000 for SLC.

The shortage is not just a pricing issue but a structural one, with analysts noting that new investment in SLC is discouraged by its small market size and long lead times for manufacturing equipment. Bryan Ao from TrendForce describes the situation as a 'severe undersupply' that is unlikely to be resolved soon, with manufacturers having no significant plans to expand capacity for these older technologies. This creates a trap where demand outstrips supply, but the market is too small to justify the billions required for new factories.

Industry observers compare the current situation to the internet infrastructure boom of the late 1990s, warning that the AI buildout may simply overshoot what the market can economically support. Jim Handy of Objective Analysis suggests that as long as hyperscalers continue to outspend each other, the shortage will persist. The result is that hardware makers may have to absorb higher component costs or pass them on to consumers, with prices expected to remain elevated for at least the next five years.