Storage And Memory Price Surges Supporting AI Demand Likely Temporary

Understanding the Current State of Digital Storage and Memory Prices

The recent surge in prices of digital storage and memory products, including hard disk drives (HDDs), solid state drives (SSDs), and memory such as DRAM, has been a topic of discussion among industry experts. This trend is largely driven by the growing demand for these products to support artificial intelligence (AI) workloads. AI requires vast amounts of data for training and inference, leading to an increased need for storage capacity. The growth in AI projects has, in turn, driven up the demand for storage and memory, as well as graphics processing units (GPUs), resulting in higher prices for all types of memory and storage.

It’s worth noting that this is a significant shift from the COVID-related crash of all storage and memory technologies in 2022 and 2023. The industry recovered in 2024, with the consumption of excess inventories at customer sites. As a result, many manufacturers, including HDD manufacturers, have been cautious about increasing their manufacturing capacity. This cautious approach has contributed to the current price surge, as manufacturers are trying to balance supply and demand.

Historical Context and Future Projections

A look at the historical exabytes shipments of HDDs from 2001 through 2024 reveals a spike in shipments in 2020 and 2021, driven by anticipated cloud storage demand during the COVID pandemic. This was followed by a massive slump in 2022 and 2023, as excessive inventories were consumed. In 2024, the industry saw continued growth, which is approximately in line with the average capacity shipment growth rate before COVID. If we extrapolate the expected growth through 2030 for HDD shipments, we can see the expected growth in storage capacity shipments required to support AI and other data-intensive workloads.

According to projections from Coughlin Associates, the extrapolated storage shipments for HDDs in 2030 are about 4X higher than in 2024. However, due to the increase in the expected storage capacity per HDD through 2030, actual HDD shipments required to meet this projected demand will be about the same in 2030 as in 2024. This is because the projected average storage capacity per shipped HDD is expected to grow from about 11TB in 2024 to about 47TB by 2030, representing a 4.3X increase.

Nearline HDD Production Capacity and Price Trends

The total HDD unit shipments through the second half of 2025 were about 59M units, and projections suggest that total shipments in 2025 will be about 120M units. This is possible without bringing up more HDD production capacity, as 2024 HDD shipments were about 124M units. The recent increases in nearline HDD prices are likely a combination of longer-term contracts established with big HDD consumers and customers buying in anticipation of future needs for AI applications, driving up the price of HDDs currently available.

This trend can create distortions in actual demand, driving companies to purchase more than their real short-term needs. However, it’s likely that there is enough nearline HDD production capacity to meet expected long-term demand, and thus, the recent price increases may be a short-term trend.

Memory Space and Boom-and-Bust Cycle

In the memory space, including DRAM and NAND flash, there is a long-term trend of a boom-and-bust cycle on capacity pricing, driven largely by manufacturers building out production capacity when prices and margins are good, and then stopping that production build-out when new production comes online and prices drop. Recent announcements from SEMI indicate that 300mm wafer fab spending will increase by 7% in 2025 over 2024, with memory-related fab spending being second after logic and micro wafer fab spending growth.

With new memory fab spending starting in 2024, it’s likely that by sometime in 2026 or at least by 2027, we will experience a glut of memory production, even with the growing demand of AI, and there will be significant contraction in memory pricing. This means that the current trend of increased prices for HDDs and other storage and memory products could be a short-term trend, with a possible correction to more historical growth rates likely by sometime in 2026.