Memory module crash? "Consumers can't afford it," but "AI demand is still booming."
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Spot prices for DDR5 memory modules plunged nearly 30% within a month. Mainland Chinese wholesalers describe the current market as a "price collapse." Google’s TurboQuant algorithm has further fueled worries of a sharp shrinkage in AI memory demand, with storage sector stocks remaining under pressure. However, analysts note that this round of collapse is happening in the consumer spot market, not in server demand which drives industry profits—the two are structurally almost parallel markets.
Due to concerns about sharp reductions in memory usage triggered by Google’s latest TurboQuant compression algorithm, combined with concentrated sell-offs by previous stockpilers, DDR5 memory module prices in U.S. and Chinese retail channels have led declines of nearly 30%. This is the first notable pullback since the surge in storage prices began, and market sentiment is shifting rapidly from an earlier “across-the-board shortage” to wait-and-see.
Although panic over a “price crash” is spreading among retailers, Wall Street and industry research firms broadly emphasize that the spot market is only a very small part of overall memory trading. Both Goldman Sachs and Korea’s Daishin Securities state that the enterprise contract market has not been affected, major cloud service providers’ demand for server memory remains strong, and the supply-demand fundamentals have not reversed. The spot market is mainly composed of PCs and consumer electronics, accounting for at most a low single-digit percentage of total market trades.
The real risk keeping institutional investors up at night comes from a different direction: The Middle East conflict is driving energy costs sharply higher, leverage in the AI industry is building at a historic pace, and multiple vulnerable points are intertwining, making this the sternest systemic stress test since AI became an economic pillar.
Spot Price Crash: Speculation Subsides After High Prices Were Exhausted
This price correction first fermented in the retail and spot markets, where drops generally range from 15% to 30%.
In the U.S., a 32GB 6400MHz DDR5 module on Amazon fell from its $490 peak to $379.99; in China, mainstream 16GB DDR5 module prices dropped from a high of 1,000 yuan to about 700 yuan. Mainland Chinese wholesalers admit that surging prices have significantly reduced non-essential purchases, with recent sales down over 60% year-on-year, and concentrated sell-offs by earlier stockpilers have further intensified the decline.
Goldman Sachs points out in its report that the rollback in spot prices is inevitable. Previously, spot prices were at a significant premium to contract prices: DDR5 and DDR4 spot prices were 25% and 111% higher than February’s contract prices, respectively. Such extreme premiums caused buyers to hold off. Even after a significant correction, spot prices remain much higher than contract and historical prices. High memory prices have suppressed PC demand and caused Chinese smartphone shipments to post double-digit year-on-year declines for three months in a row.
Server Demand: The Real Engine Supporting Storage Fundamentals
Away from spot market noise, signals from the server side are clear and strong. Daishin Securities analyst Ryu Hyung-geun notes that the spot market is mainly made up of PCs and consumer electronics, at most accounting for a low single-digit share of total market transactions. In the current structure, what really determines storage chip profitability is mobile and server products.
Macroeconomic data confirms this logic. According to Goldman Sachs, February revenues for Taiwanese server ODMs (including Inventec, Quanta, Wiwynn, and Wistron) rose 84% year-on-year and 7% month-on-month, maintaining 80%+ annual growth for four straight months, driven mainly by surging rack-scale AI server shipments and strong growth in ASIC AI servers. Aspeed, the world’s largest server BMC chip supplier, saw February revenue grow 66% year-on-year, remaining robust even against a high 2025 base. Storage distributor Supreme Electronics’ February revenue soared 137% year-on-year, clearly reflecting channel-level demand.
Daishin Securities’ channel checks provide another convincing detail: a major cloud provider decided to purchase server DDR4 at prices exceeding those for HBM3e. "If real demand was already weakening, you couldn't explain why buyers would pay a premium for legacy products," wrote Ryu Hyung-geun.
Goldman’s forecast for HBM also differs notably from Wall Street consensus—it predicts SK Hynix’s HBM shipments will rise 56% in 2026, 15 percentage points above the consensus estimate of 41%, reflecting strong conviction in continued investment in AI infrastructure.
Importantly, according to Goldman Sachs, even as spot prices have fallen in mainland China, memory supply shortages remain severe. Some mobile clients have even had to lower their full-year smartphone shipment targets due to memory supply constraints. Thus, the supply-demand mismatch hasn’t been resolved—it’s just been masked by retail price volatility.
TurboQuant: Emotional Impact Far Greater Than Fundamental Damage
Google’s TurboQuant algorithm is the key catalyst behind this round of deteriorating market sentiment, but its actual impact may be greatly overestimated by the market.
According to a previous Wallstreetcn article, TurboQuant reduces memory usage for AI inference KV Cache to about one-sixth of the original amount, so in the short term it may indeed lower the amount of memory per AI server. However, Goldman Sachs notes this effect is two-sided: more efficient memory use lowers the threshold for AI deployment, which could greatly expand overall penetration of AI agents and on-device AI, driving total memory demand further.
Goldman Sachs points out that investors are now focusing on “declining memory usage”—the first half of the story—while ignoring the “accelerated AI adoption and volume growth” in the second half. This concern mainly reflects short-term emotional pressure rather than true fundamental damage. The industry widely believes that TurboQuant might speed up AI adoption in the long run; its medium- to-long-term impact on memory remains to be seen, and current negative interpretations are incomplete.
The Real Black Swan: Energy Shock and Mounting Debt
As the market focuses on falling memory prices, the real systemic risks are quietly accumulating elsewhere.
The Middle East conflict has already had tangible effects on the AI industry supply chain. As reported by Wallstreetcn, shipping disruptions in the Strait of Hormuz have pushed Brent crude oil prices up 40% in a month, liquefied natural gas prices soared in both Western and Asian markets, and helium spot prices have doubled. The world’s most advanced memory and training chips are supplied mainly by three Asian companies, whose economies largely rely on Persian Gulf imports for oil and LNG, and crucial chipmaking materials like helium, sulfur, and bromine are also heavily dependent on the region. Sam Winter-Levy, a technology and national security fellow at the Carnegie Endowment for International Peace, said the Strait “is essential for virtually every aspect of the global economy, and the AI supply chain is certainly not immune.”
At the same time, the speed at which AI industry debt is expanding has set off alarms among institutions. Microsoft, Google, Meta, and Amazon together are investing nearly $700 billion in AI in a single year; the big operators’ debt issuance in 2025 will reach $121 billion, four times the average of recent years. Private equity players like Blackstone, BlackRock, and Blue Owl Capital are pouring money into data center construction, assuming tech company rents will support returns. Funding sources include pensions, endowments, and insurers, extending risk transmission chains across the financial system.
Of course, not every scenario leads to full-blown crisis. Both Anthropic and OpenAI have seen revenues double annually, and data center spending could cool gently enough to avoid a hard landing. Still, given energy shocks, debt buildup, and highly-concentrated supply chains all at once, “even minor issues at a few points could spark a systemic crisis”—and that is the real variable that storage sector investors must keep a close eye on.
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