J.P. Morgan estimates DRAM prices up over 400% since 2024 amid AI boom

Amazon Amazon.com, Inc. ↗ 0.82% CEO Andy Jassy told investors on the company's second-quarter earnings call on July 30 that capital expenditures for 2026 will reach approximately $220 billion, up $20 billion from prior guidance, with the increase driven by surging memory chip prices.cnbc+1

"The higher cost of memory is pushing this number up from our prior estimate of about $200 billion," Jassy said, adding that "even at that amount, we will not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027." He called demand already booked for 2028 "striking."theglobeandmail+1

AWS Powers the Spending Surge

The capex revision came alongside Amazon Web Services results that showed the cloud unit posting $42.2 billion in revenue for the quarter, up 37% year over year — its fastest growth rate in 18 quarters, according to Fortune. AWS operating income reached $16.6 billion, up 64% from the same period a year ago, on a 39.4% margin. Amazon's shares rose more than 9% in after-hours trading following the report.fortune

The bulk of the spending flows through AWS as enterprises demand more cloud and AI capacity. Amazon is also investing in custom silicon, its Project Kuiper satellite constellation, and robotics for fulfillment centers.theglobeandmail

A Multi-Year Memory Shortage

Jassy's remarks confirmed what analysts have been warning about for months. J.P. Morgan JPMorgan Chase & Co. ↗ 0.34% Global Research estimates that DRAM prices will have risen more than 400% from the start of 2024 to the end of 2026, driven by hyperscalers locking up supply through long-term agreements that in some cases extend five years or more.jpmorgan

"Given ~90% annualized token cost per watt decline and rising agentic AI computation workload demand, it is not a secret that the industry will stay in shortage for multiple years," said Jay Kwon, a J.P. Morgan equity analyst covering memory and semiconductors.jpmorgan

The shortage has implications beyond cloud providers. J.P. Morgan economists note that consumer electronics prices are already climbing, with the Consumer Price Index for software and accessories and the Producer Price Index for storage devices both up 23% since the end of 2024.jpmorgan

Memory Suppliers Stand to Benefit

For Micron Technology ↘ 0.44%, one of only three manufacturers capable of supplying advanced DRAM and high-bandwidth memory at scale, Amazon's revised budget reinforces the case for sustained pricing power. Meta Platforms ↗ 0.37% separately raised its own 2026 capex guidance by $10 billion, also citing higher AI hardware and memory costs.jpmorgan

The capacity constraints forcing hyperscalers to spend more signal that order books for memory producers should remain robust well beyond the current year — a dynamic the memory sector has rarely enjoyed in prior cycles.theglobeandmail