After a brief pause on May 8th, the market celebrated again today, with the Shanghai Composite, Shenzhen Component, ChiNext, and STAR Market indices all opening higher. Technology concepts such as CPUs, HBM, and memory led the gains.

From nearly being sold "by the pound" a few years ago to becoming the "hot favorite" in the global tech circle today, Goldman Sachs indicates that the current tightness in the semiconductor supply chain may persist until 2027 or even longer. Even after significant gains, this might only be the appetizer, with the real major rally still to come.

Improving Industry Conditions Catalyze Stock Rises When discussing the hottest sectors currently, memory chips firmly hold a place. Once experiencing price declines for three consecutive years, the industry has now seen a dramatic reversal. A wave of price increases has swept through the entire chain, and shortages have become the norm.

Memory chips are semiconductor devices used for data storage, widely applied in computers, smartphones, servers, and other electronic devices. They are primarily categorized into volatile memory (e.g., DRAM, SRAM) and non-volatile memory (e.g., NAND Flash, NOR Flash). Volatile memory requires continuous power to retain data, while non-volatile memory can preserve data after power loss.

According to Bernstein, DRAM contract prices surged 85%-100% quarter-over-quarter in Q1 2026. TrendForce data shows that as of March 2026, spot prices for mainstream DDR4 models had risen by 1788% compared to early 2025, with DDR5 up 740%. NAND prices also surged sharply, with the China Flash Market NAND index up 396% from early 2025.

In the A-share market, all constituent stocks of the memory chip index have risen since 2025. Shenzhen DMEC rose over 900% cumulatively. Shannon Semiconductor, Dosilicon, and Longsys saw cumulative gains exceeding 500%. More than half of the stocks (25 out of 41 concept stocks) have at least doubled in price.

Memory Chip Supply Shortage Hits Record High The sustained surge in memory chip concept stocks is not driven by speculation but by a genuine case of "too many mouths, not enough food." On the demand side, AI is the primary driver. Previously reliant on slow growth from consumer electronics like phones and computers, memory chips have shifted from a supporting role to a core necessity due to accelerated AI model iteration and exploding computing power demand. Authoritative estimates indicate that a single AI server uses 8-10 times the DRAM and over 3 times the NAND of a traditional server, meaning one AI server consumes the memory capacity of several ordinary servers. Crucially, as AI models advance, memory demand becomes more extreme. The top four North American cloud providers plan to invest $600 billion in AI infrastructure in 2026, a year-over-year increase exceeding 50%, with a significant portion allocated to memory.

On the supply side, memory chip expansion cycles last 18-24 months. Following years of industry losses, manufacturers were hesitant to expand capacity. Now, with sudden demand spikes, production cannot keep up. Simultaneously, global giants Samsung, SK Hynix, and Micron have shifted 80%-90% of their advanced capacity to high-end AI memory (e.g., HBM), directly squeezing capacity for standard memory. This has driven global memory chip inventory down to a historic low of around 4 weeks, far below the 8-12 week safety level. Goldman Sachs states the industry is on the eve of the most severe memory chip shortage in 15 years, with supply-demand gaps for DRAM, NAND, and HBM in 2026 reaching highs not seen since 2011.

Since last year, multiple analyses have shared investment opportunities in the memory concept, clearly stating by year-end that this supercycle would extend to 2027.

Rapid Earnings Growth Across the Industry Chain Rising stock prices are matched by strong earnings. As price increases continue, the entire memory chip industry chain is experiencing rapid profit growth.

Overall, the 41 A-share memory chip concept stocks achieved a combined net profit attributable to shareholders of 34.727 billion yuan in 2025, a 29.14% increase year-over-year. For Q1 2026, excluding SMIC and Hua Hong Semiconductor which have not yet reported, the remaining companies collectively achieved net profit attributable to shareholders of 21.008 billion yuan, a staggering 411.23% increase compared to Q1 2025.

At the individual stock level, Shannon Semiconductor reported 2025 net profit attributable to shareholders of 545 million yuan, up 106.23% year-over-year. Its Q1 2026 net profit reached 1.327 billion yuan, surging 7835.06% compared to Q1 2025.

Similarly, BIWIN Storage reported 2025 net profit attributable to shareholders of 853 million yuan, a 429.07% year-over-year increase. Its Q1 2026 net profit hit 2.899 billion yuan, not only representing a strong turnaround from a year-ago loss but also exceeding its full-year 2025 profit in a single quarter.

Looking ahead, institutions are broadly optimistic about memory chip earnings prospects. CITIC Securities explicitly states the supply-demand imbalance will persist until 2027, with price increases continuing throughout 2026. Citi forecasts average DRAM prices to rise 88% and NAND prices 74% for full-year 2026. SK Hynix has stated that 2026 demand from all customers cannot be fully met.

From a corporate perspective, global memory manufacturers are increasing capital expenditures. The world's leading players plan total investments exceeding $136 billion in 2026, a 25% year-over-year increase. Domestic firms like SMIC and GigaDevice are also boosting investment to expand capacity. Institutions predict the profitability momentum for memory companies will continue.

(Mentioned stocks are for illustrative analysis only and not investment recommendations.)