03 · Supply & Demand

An AI-shaped demand shock

Demand and supply have decoupled by segment. AI data-center build-out is pulling logic and high-end memory vertical, while the capacity to serve it — leading-edge wafers, CoWoS packaging, HBM — is the binding constraint. Everything else competes for what's left.

~50%
of revenue from AI-linked demand
<1% of unit volume
$54.6B
HBM market, 2026E
▲ from ~$35B in 2025
+51% / +45%
2026 DRAM / NAND rev. growth
BofA "super-cycle"
2027+
expected memory shortage horizon
supply reserved years ahead
3.1

The demand side: AI eats the cycle

The 2026 up-cycle is unusually narrow and unusually steep. WSTS expects logic to grow ~37% and memory ~28% — the categories tied to AI accelerators and the servers around them — while mature segments like analog, discrete and optoelectronics grow in the mid-single digits. AI chips now drive roughly half of revenue from a tiny slice of unit volume, a structural shift toward high-value silicon.

Data-center AI accelerators

Estimated market revenue, US$ billions
Source: company filings, Silicon Analysts, market estimates

AI accelerator share by supplier

Data-center accelerators, 2026E
Source: market estimates (merchant GPU + custom ASIC)
Watch · custom silicon Hyperscaler ASICs (Google TPU, AWS Trainium, Microsoft Maia, Meta MTIA) are the fastest-growing slice — ASIC shipments are growing ~45% YoY versus ~16% for merchant GPUs. Broadcom's AI ASIC revenue hit $8.4B in a single quarter with a multi-tens-of-billions backlog, signaling demand visibility into 2027.
3.2

The memory super-cycle

Memory is where the squeeze is most visible. Samsung, SK Hynix and Micron — together ~95% of DRAM and NAND — are re-tooling fabs toward HBM and server DDR5 to feed AI, starving the conventional market. The result: rising prices across the board and warnings of shortages lasting through 2027. SK Hynix held ~53% of the HBM market in Q3 2025, ahead of Samsung (~35%) and Micron.

HBM market & the AI memory boom

High-bandwidth memory revenue, US$ billions
Source: TrendForce, Goldman Sachs, SK Hynix outlook

HBM supplier share

Q3 2025
Source: TrendForce, company reporting
Spillover As HBM consumes a growing share of DRAM wafer capacity (estimates put it above 20% in 2026), conventional DRAM and NAND tighten — pushing up prices for PCs, phones and consumer devices that never touch an AI workload.
3.3

The supply side: capacity & capex

The answer to a demand shock is capacity, and capacity costs more every cycle. Global semiconductor capex is forecast to reach roughly $200B in 2026 (up ~20%), with TSMC alone accounting for over a quarter of it. New leading-edge fabs in Arizona, Taiwan, Japan and Korea are coming online, but the gating items — EUV tools, CoWoS packaging, HBM — have long lead times.

Industry capital expenditure

Global semiconductor capex, US$ billions
Source: Semiconductor Intelligence, SEMI estimates

2026 capex by leading spender

Approximate, US$ billions (definitions vary by company)
Source: company guidance, analyst estimates
3.4

Where the constraints are

Tightest

HBM, CoWoS advanced packaging, leading-edge (3/2nm) wafers, server DDR5. Customers reserving supply years ahead.

Tightening

Conventional DRAM & NAND (spillover from HBM re-allocation), substrates, some power devices.

Balanced / soft

Mature-node analog, microcontrollers and auto chips after the 2022–23 glut; mainstream consumer logic.