Preview|MU FY26Q4: Focusing on Earnings Sustainability; A Higher, Longer Plateau

Over the past three months, many market participants have been concerned that memory prices would drop rapidly after peaking, following the path seen in past consumer electronics cycles. However, we already expressed our view in our report following our attendance at FMS in early August: we believe memory prices are more likely to settle into a longer plateau after reaching their peak.

We can broadly divide the memory market into two segments: consumer electronics and AI. In the consumer electronics segment, memory price increases are indeed approaching their limit; however, due to persistent supply shortages and limited newly added capacity, we see little chance of a sharp pullback in consumer electronics memory prices.

In AI, while we clearly can no longer expect the QoQ increases seen in 26Q1 and 26Q2, based on our checks, we believe the price increases in 26Q3 and 26Q4 could exceed expectations and may continue to rise in 27Q1. We believe CSPs have set a negotiation target for 2H26 and 27Q1 to cap quarterly DRAM price hikes at a maximum of 30%. In other words, memory vendors are very likely demanding DRAM price hikes of over 30%, and the final executed pricing will most likely land within the 20%–30% range. Furthermore, memory inventories remain quite low across both GPU vendors and CSPs; therefore, the urgency in negotiations is far higher for CSPs than for memory suppliers. Regarding medium- to long-term memory price trends, some industry experts also believe that, driven by existing and planned projects, strong demand is expected to last for 3 to 5 years. Consequently, future memory prices would transition to a mild annual increase of 5% to 10%, which is even more optimistic than the "plateau" we envision.