DRAM and NAND shipments surged by over 370%! Wells Fargo states that the rising costs of AI infrastructure are not a red flag, and the semiconductor boom cycle continues.

Wells Fargo & Company has released a report citing data from the Semiconductor Industry Association (SIA), stating that memory chips have become the core driver of the current industry's high growth. The data shows that total semiconductor shipments in June increased by 134% year-over-year, reaching $151.9 billion. Excluding memory chips, semiconductor shipments grew by 38% year-over-year, totaling $63.5 billion, compared to an increase of 34% in May. The analyst team led by Aaron Rakers noted that in June, the shipment of dynamic random access memory (DRAM) increased by 373% year-over-year, reaching $56.8 billion, while the growth rates in April and May were 386% and 350%, respectively. In June, bit shipments rose by 26% year-over-year, while April and May saw increases of 58% and 27%, respectively. Another core memory category, NAND flash memory, also continued its explosive growth, increasing by 377% year-over-year in June to approximately $30.7 billion, with year-over-year growth rates of 351% and 376% in April and May, respectively. However, in June, bit shipments only increased by 2% year-over-year, further confirming that the high growth in the memory industry this time is driven by rising chip prices rather than an expansion in shipments, with a continued tight supply-demand situation for memory chips. In June, the shipment of analog chips increased by 22% year-over-year, reaching $8.42 billion. These robust figures further substantiate the demand support and resilience of the semiconductor sector. Recent Adjustments Following Strong Performance of Memory Leaders Amid High Industry Growth Benefiting from the ongoing investment in AI computing infrastructure, high-end memory chips are in global short supply and prices have risen sharply, making the memory sector one of Wall Street's hottest investment tracks this year. However, despite the high industry growth, the memory sector has recently seen a correction. On Thursday, shares of SanDisk (SNDK.US) and Western Digital Corporation (WDC.US) fell sharply after their earnings reports, leading to a collective adjustment in the sector. This reaction highlights the market's high expectations for popular AI stocks. Although these companies have achieved remarkable growth, they still fail to meet investors' most optimistic expectations. Divya Mathur, a portfolio manager at ClearBridge Investments, stated, The recent volatility in semiconductor stocks seems unrelated to any substantive changes in long-term fundamentals. While investors may be reassessing expectations and risk preferences, short-term price reactions often are more severe than what the fundamentals suggest. Wells Fargo & Company Analysis: Rising AI Infrastructure Costs Not a Dangerous Signal In response to market concerns regarding rising AI costs, Wells Fargo & Company provided a clear optimistic outlook, stating that the rise in AI infrastructure costs does not pose a danger. Wells Fargo & Company analyst Ken Gawrelski stated in an earlier report that while the costs of building AI infrastructure continue to rise, leading cloud service providers have sufficient pricing power to pass the increased costs onto their enterprise customers. Even as capital expenditures in the AI field accelerate, they can still maintain a respectable return on investment. The research report mentioned that the price increases of memory chips and next-generation chips will elevate the capital expenditures associated with AI computing power per gigawatt by 22% compared to previous estimates by institutions. However, the strong pricing ability of top cloud providers can effectively offset the pressures from rising costs, ensuring profit stability. Wells Fargo & Company estimates that by 2027, the capital expenditures for AI infrastructure among the four major cloud service providers will reach $1.1 trillion, which is 23% higher than general expectations.