Rising AI server demand is dampening the IT and smartphone markets as US hyperscalers suck up memory, forcing everyone else to accept higher prices

Much of the focus on resource depletion has been around AI infrastructure, in particular the energy and water demands, plus rising construction costs, but the rush to embed AI in everything has massive implications for the consumer IT and smartphone markets this year – and these are not good.

Taiwan-based analysts TrendForce reckon conventional DRAM contract prices in 1Q26 are forecast to rise 55–60% QoQ, while NAND Flash prices are expected to increase 33–38% QoQ. The DRAM supply-demand gap continues to widen as US-based hyperscalers lock in capacity, forcing other buyers to accept higher prices; server DRAM prices are projected to surge by more than 60% QoQ.

In addition, NAND Flash demand is increasingly polarized between consumer and AI applications, with enterprise SSDs becoming the largest segment; client SSD prices are forecast to rise by over 40%. For anyone screaming “so what”, DRAM suppliers in 1Q26 will continue to reallocate advanced process nodes and new capacity toward server and HBM products to support rising AI server demand. This shift has significantly limited supply in other markets, namely PC/notebooks/smartphones.

As a result, TrendForce said despite weaker notebook shipments and slower growth in memory demand due to potential specification downgrades, PC DRAM prices are still set to rise sharply in the first quarter. DRAM suppliers have simultaneously tightened supply to PC OEMs and module makers, forcing some OEMs to procure memory at higher prices through modules makers.

Impact on smartphones

Although smartphone brands generally experience lower memory demand during the seasonal lull, the tight supply of mobile DRAM is unlikely to relax soon, and contract prices could increase further in the upcoming quarters. Consequently, brands are continuing to pursue strong procurement efforts in 1Q26. Both the LPDDR4X and LPDDR5X markets are expected to stay undersupplied with uneven distribution of resources, which supports higher prices.

In the eMMC/UFS segment, smartphone demand is weakening because promotional sales in the first half of 2025 have already accelerated consumption, and the market is moving into an inventory adjustment phase in the first quarter of 2026. As a result, smartphone shipments are expected to fall significantly QoQ.

Korean press reported Samsung this week is leaning towards price increases for its Galaxy S26 series set to debut at the Galaxy Unpacked event in San Francisco on 25 February. While Samsung said nothing has been decided yet, it is now in the position of having to decide whether to absorb the higher costs to keep an edge over rivals or instead use the surge in memory prices as grounds to raise its prices.

According to market analysts Omdia, the prices of 96-gigabyte Low Power Double Data Rate 5 (LPDDR5), a DRAM for smartphones, have surged approximately 70 percent from early 2025, while that of NAND flash for smartphone storage have risen 100 percent. TrendForce also assumes that this year’s smartphone bill of materials (BoM) costs will grow by 5 to 7 percent compared to 2025.

For the Galaxy S26, Samsung initially sought to secure a price advantage by using its in-house Exynos 2600 application processor for the standard model. But memory prices have surged far sharper than the company expected, leaving it with little choice but to reflect the increases in product pricing, according to the report.

Reuters reports that shares of the world’s top memory chip providers rose this week as investors bet on further price gains due to a global supply crunch driven by surging demand for AI infrastructure. No doubt, some telecom stock holdings have been trimmed as a result of shifting investor appetites for AI.

In a bind

Despite tight overall DRAM supply, TrendForce says consumer buyers are prepared to pay more to secure priority access in 1Q26 and mitigate future shortage risks. Though, cautious capacity growth from some suppliers and the requirement to allocate output for higher-density products will keep supply below demand in the near term, supporting ongoing price increases.

AI inference-driven infrastructure developments are consistently driving procurement for the hyperscalers. Since late 2025, these companies have been pulling in orders, creating increased demand for server DRAM. Backed by strong past purchasing trends and positive demand forecasts, they are gaining a larger portion of the bit supply growth from suppliers. Supply tightness continues to intensify with suppliers’ inventories approaching depletion and shipment growth reliant solely on wafer output increases.

TrendForce predicts that in 1Q26, client SSD demand will decline due to a QoQ drop in notebook shipments and the downgrading of some entry- and mid-range models to reduce BOM costs. Meanwhile, suppliers focused on profit maximisation are shifting supply from client SSDs to data center SSDs. The availability of high-capacity, low-cost QLC products is especially limited. As a result, contract prices for client SSDs are expected to increase by at least 40% QoQ, marking the largest rise among all NAND Flash products.

However, TrendForce forecasts the global server market to reach its peak in 2026 as US big tech speeds up investments in AI infrastructure. This growth is boosting demand for enterprise SSDs, making them the leading NAND Flash application segment. Supply is becoming tighter due to limited capacity and suppliers prioritising profits and controlling shipments, which is driving up enterprise SSD prices.

This article originally appeared on Mobile Europe.