Morgan Stanley believes the recent decline in U.S. memory stocks has created an attractive opportunity for investors, arguing that demand for data center memory continues to outpace supply despite mixed signals from other parts of the semiconductor market.
The investment bank said the ongoing shortage of memory used in artificial intelligence infrastructure remains a key driver of the sector and expects supply constraints to persist.
AI Demand Continues to Drive the Memory Market
Morgan Stanley analyst Joseph Moore described the current memory cycle as fundamentally different from previous ones, saying, “data center strength is the only cause” behind it, adding that mixed signals elsewhere in the market “may be a false flag.”
Although Moore said Nvidia and Broadcom continue to offer the strongest overall risk-reward within the firm’s semiconductor coverage, he noted that memory stocks are rapidly becoming more attractive.
Memory Is Emerging as a Critical AI Bottleneck
According to Morgan Stanley, concerns over slowing growth rates, rising capital expenditure and lower memory specifications had been widely anticipated.
However, the firm believes this cycle differs because memory has become “increasingly THE bottleneck” to AI builds and agentic CPU builds.
That growing importance has continued to tighten supply across the data center market.
Memory Prices Continue to Climb
Morgan Stanley estimates that data center memory prices have increased by more than 25% during the third quarter.
While this represents slower growth than the sharp gains recorded during the second quarter, the bank described the moderation as “obvious,” suggesting that longer-term supply agreements and product de-speccing may reduce the volatility of the cycle while extending its duration.
The firm believes a longer, more stable pricing cycle could ultimately provide stronger support for memory-related stocks over time.
Supply Constraints Show No Signs of Easing
Following discussions with data center procurement contacts last week, Morgan Stanley said memory shortages “show no signs of abating.”
The bank noted that prices have risen by at least 25% quarter-over-quarter, exceeding both its own forecasts and estimates from third-party industry sources.
Looking further ahead, Morgan Stanley added that concerns over worsening memory shortages in 2027 and 2028 “are still as strong as ever.”