Memory crunch: Cloud operators may be pushed to splurge 68% of capex on DRAM and NAND

The rising cost of contract prices for memory chips could see DRAM and NAND flash account for more than two-thirds of the capital expenditure of cloud service providers (CSPs) by next year. Taiwan-based market watcher TrendForce forecasts that total capex by cloud operators will almost double this year – up 98 percent – and grow a further 50 percent in 2027. That rapid rise is driven partly by growing investment in new infrastructure, but also by soaring memory bills. The upshot is that TrendForce estimates DRAM and NAND flash will account for 47 percent of the total spend on hardware this year, jumping to 68 percent of it in 2027. The analyst doesn’t put revenue figures to its predictions, but reckons server DRAM components will have grown by 270 percent year-on-year by the end of 2026, with enterprise SSD prices up 235 percent over the same period. As Reg readers know, growing demand for high-performance memory from big customers is prompting DRAM and NAND chip suppliers to prioritize production capacity for server applications. TrendForce estimates that HBM – used in GPUs – and RDIMMs used in servers will together account for more than half of DRAM bit supply this year. The effects are already visible in PC prices climbing by double-digit percentages due to a shortage of standard memory parts, and overall PC shipments falling by 5 percent in response. The smartphone market has been hit in a similar fashion, with shipments expected to fall by 15 percent this year. For enterprise customers, the knock-on effects are becoming hard to ignore. As memory eats an ever-larger share of CSP capex, that cost is unlikely to stay with the cloud providers and will be passed down. Earlier this month, Euro operator OVHcloud warned it was planning to inflate its charges by up to 87 percent to cover rising memory costs in a preview of what other providers may follow with. As if that isn’t bad enough, TrendForce says that elevated memory costs provide server and AI chip suppliers such as Nvidia with greater justification for raising their own prices. Sure enough, recent news reports claim Nvidia plans to charge 15 percent more for products containing its Vera Rubin and Grace Blackwell chips. To counter this cloud operators may need to increase capital expenditure even further to maintain their targeted level of infrastructure expansion – which means more price increases for users. ®

Source: Read the original article on www.theregister.com