Rampant AI demand for memory is fueling a growing chip crisis

A growing procession of tech industry leaders including Elon Musk and Tim Cook are warning about a global crisis in the making: A shortage of memory chips is beginning to hammer profits, derail corporate plans and inflate price tags on everything from laptops and smartphones to automobiles and data centers — and the crunch is only going to get worse. 

Since the start of 2026, Tesla Inc., Apple Inc. and a dozen other major corporations have signaled that the shortage of DRAM, or dynamic random access memory — the fundamental building block of almost all technology — will constrain production. Cook warned it will compress iPhone margins. Micron Technology Inc. called the bottleneck “unprecedented.” Musk got to the intractable natureo f the problem when he declared Tesla is going to have to build its own memory fabrication plant. 

“We’ve got two choices: hit the chip wall or make a fab,” he said in late January.

The fundamental reason for the squeeze is the buildout of AI data centers. Companies like Alphabet Inc. and OpenAI are gobbling up an increasing share of memory chip production — by buying millions of Nvidia Corp. AI accelerators that come with huge allotments of memory — to run their chatbots and other applications. That’s left consumer electronics producers fighting over a dwindling supply of chips from the likes of Samsung Electronics Co. and Micron.

The resulting price spikes are starting to look a bit like the Weimar Republic’s hyperinflation. The cost of one type of DRAM soared 75% from December to January, accelerating price hikes throughout the holiday quarter. A growing number of retailers and middlemen are changing their prices every day. “RAMmageddon” is the term some use to describe what’s coming. 

“We stand at the cusp of something that is bigger than anything we’ve faced before,” Tim Archer, chief executive officer of chip equipment supplier Lam Research Corp., said at a conference in South Korea this month. “What is ahead of us between now and the end of this decade, in terms of demand, is bigger than anything we’ve seen in the past, and, in fact, will overwhelm all other sources of demand.”

What’s worrying about the trend is that prices are soaring and supplies are running dry even before the AI giants really get going with their data center construction plans. Alphabet and Amazon.com Inc. just announced plans for a construction blitz this year that could reach $185 billion and $200 billion, respectively, more money than any company in history has poured into capital expenditures in a single year.

Mark Li, a Bernstein analyst who tracks the semiconductor industry, warns that memory chip prices are going “parabolic.” While that will bring lavish profits to Samsung, Micron and SK Hynix Inc., the rest of the electronics sector will pay a painful price in the months ahead.

“This structural imbalance........

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