Demand for AI chips, data centers and memory has exploded as companies around the world race to build more powerful AI systems.
But there may be a limit to how much customers are willing to pay. In fact, Kioxia CEO Hiroo Ota recently made that point clear. He said memory prices have already gone up enough and warned that another sharp increase could eventually hurt investment in AI.
That may sound strange at first. After all, higher prices are usually good news for memory-chip companies. But there is a catch. If memory becomes too expensive, the companies buying it could start cutting back on their spending.
And that could eventually hurt the entire industry.
AI Needs a Lot of Memory
When people talk about AI chips, they often focus on companies like Nvidia (NASDAQ: NVDA) and the powerful processors used to run AI models. But those processors need memory to work. AI systems handle huge amounts of data, so data centers need large amounts of memory to keep everything running quickly. One type, called high-bandwidth memory, or HBM, has become especially important for AI systems. That has created substantial demand for memory.
Companies such as Kioxia, Micron (NASDAQ: MU) and SK Hynix (NASDAQ: SKHY) have benefited as data-center operators compete for limited supplies. When demand is high and supply is tight, prices naturally go up.
And they have gone up quickly. According to TipRanks, Kioxia’s NAND prices jumped 70% in the June quarter after more than doubling in the previous quarter.
But Ota doesn’t think that kind of increase can continue forever.
There Is a Limit to What Customers Will Pay
For memory companies, rising prices are obviously attractive.
If a company can sell the same product for more money, its revenue and profits can increase.
The problem is that customers have budgets, too. Think about a company building a massive new AI data center. It already has to pay for processors, networking equipment, electricity, cooling systems and buildings.
Now imagine the cost of memory suddenly jumps by another 50% or 70%.
The company has to find that extra money somewhere.
It might decide to spend more. But it could also delay a project, buy less equipment or look for ways to reduce its memory needs. That’s what Kioxia appears to be worried about.
Ota’s message is basically this: Memory companies don’t want to raise prices so much that they make it harder for customers to keep investing in AI.
The AI Boom Is Still Strong
That doesn’t mean the AI boom is coming to an end.
Demand for memory remains extremely strong. Data-center companies continue to spend heavily on AI infrastructure, and chipmakers are still trying to keep up. In fact, the shortage of high-bandwidth memory has become such a big issue that some Chinese AI-chip companies have reportedly raised their own prices because their costs are going up.
So, this isn’t a story about AI demand disappearing.
It’s a story about finding the right balance. Memory companies want higher prices because they improve profits. But they also need their biggest customers to keep buying. If prices rise too quickly, those customers could start slowing down.
Investors Are Starting to Pay Attention
The comments from Kioxia come at an interesting time for memory stocks.
Micron, SanDisk (NASDAQ: SNDK) and SK Hynix were all under pressure in pre-market trading this morning after making strong gains the previous day. Some of that could simply be investors taking profits after the recent rally.
But Ota’s comments give investors another reason to think about how much further memory prices can realistically rise.
The market has been betting on strong memory demand because of AI. If prices continue rising, that could be good for memory companies in the short term.
The bigger question is what happens after that.
Can prices keep climbing without causing AI companies to slow their spending?
