--- title: "Why Is the Memory Chip Shortage So Hard to Fill? Morgan Stanley: Cleanroom Shortages + Lithography Machine Capacity Constraints Limit Expansion" type: "News" locale: "en" url: "https://longbridge.com/en/news/288577898.md" description: "Memory chips are becoming the scarcest strategic resource in the AI era. Morgan Stanley points out that due to physical bottlenecks such as the long construction cycle for cleanrooms and limited supply of EUV lithography machines, the supply-demand imbalance in DRAM and NAND is unlikely to ease in the next two to three years. AI cloud providers continue to snap up HBM and high-performance storage at high prices, pushing memory prices into an upward cycle" datetime: "2026-06-03T12:38:27.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/288577898.md) - [en](https://longbridge.com/en/news/288577898.md) - [zh-HK](https://longbridge.com/zh-HK/news/288577898.md) --- # Why Is the Memory Chip Shortage So Hard to Fill? Morgan Stanley: Cleanroom Shortages + Lithography Machine Capacity Constraints Limit Expansion The AI computing power arms race is pushing the memory chip market into a structural shortage, a gap that appears nearly unsolvable in the coming years. According to Zhuifeng Trading Desk, Morgan Stanley stated in its latest research report released on June 3 that **DRAM has become the core bottleneck for the expansion of AI infrastructure, while NAND supply is also extremely tight. The supply-demand imbalance is expected to persist for two to three years or even longer.** The report simultaneously **raised the target prices for Micron Tech and SanDisk significantly. Micron Tech's target price was raised from $520 to $1,050, and SanDisk's target price was raised from $1,100 to $1,750. Both stocks maintain an Overweight rating.** Joseph Moore, an analyst at Morgan Stanley, emphasized in the report that the core obstacle constraining supply expansion is not a lack of capital willingness, but hard physical constraints—insufficient cleanroom capacity and limited supply of EUV lithography machines. This means that even if memory manufacturers intend to expand production on a large scale, the actual implementation speed will be strictly limited. This judgment directly supports Morgan Stanley's core argument that the profit cycle for memory stocks will be "longer and higher," leading it to raise its earnings per share (EPS) expectation for Micron Tech for CY2027 by 48%. ## The Physical Ceiling on Supply Expansion Morgan Stanley's report clearly points out that the reason this round of memory shortages has "no quick fix" lies fundamentally in two insurmountable physical bottlenecks to expansion: the long construction cycle for cleanrooms and the limited capacity of EUV extreme ultraviolet lithography machines. The construction of cleanrooms, from planning to production, typically takes several years. This means that even if memory manufacturers start expansion now, new capacity will struggle to form effective supply in the short term. Meanwhile, as the core equipment for advanced process memory production, the global supply of EUV lithography machines is itself strictly constrained, further compressing the space for manufacturers to respond quickly to market demand. Morgan Stanley pointed out in the report that bit supply growth for DRAM will accelerate in 2027–2028 as new capacity comes online, but the overall pace will still be constrained by construction timelines and production ramp-up periods. In addition, the high wafer consumption ratio in HBM (High Bandwidth Memory) production structurally continues to compress the available supply of standard DRAM. ## DRAM: The Core Bottleneck for AI Infrastructure Morgan Stanley characterizes DRAM as the "primary bottleneck" in the current expansion of AI infrastructure. Hyperscalers' purchasing willingness remains strong, and their willingness to pay premiums continues to stay at high levels. The report predicts that DRAM prices will rise by 40% quarter-on-quarter in the May quarter and by another 15% in the August quarter. Morgan Stanley noted that price hike expectations heard during its supply chain surveys in Taiwan were even higher—some supply chain participants expected single-quarter increases of 20% or more—but Morgan Stanley chose to adopt relatively conservative assumptions, cautioning that not all businesses will reprice in sync with quarterly adjustment rhythms. Based on higher pricing assumptions, Morgan Stanley raised its adjusted EPS expectations for Micron Tech for CY2026 and CY2027 by 4% and 48%, respectively. The new forecasts are approximately $20 per share (for the F3Q26 single quarter) and $113.85 per share (for the full year CY2027), both significantly higher than market consensus expectations. ## NAND Also Tight, SanDisk Benefits from Cloud Demand The supply-demand landscape in the NAND market is also tight. Morgan Stanley pointed out that hyperscalers are continuously seizing shares of high-performance NAND, a trend that is structurally reshaping the demand profile for this category, while supply-side adjustments are lagging significantly. Kioxia, SanDisk's joint venture partner, only slightly raised its long-term bit growth expectation from 20% to 22% at its recent Investor Day, and its capital expenditure plan remains low, at approximately 470 billion yen per year. Morgan Stanley believes that Kioxia's conservative expectations for smartphone and PC market demand are the main reasons for its restrained capital expenditures. Although demand in the mobile and PC sectors is weak, Morgan Stanley emphasizes that this has not dragged down the overall pricing environment for NAND. The report raised SanDisk's EPS expectations for CY2026 and CY2027 by 12% and 24%, respectively, also driven primarily by higher pricing. Morgan Stanley raised SanDisk's target price to $1,750, based on a valuation framework of 28 times a through-cycle EPS of $62.50. ## Valuation Still Has Room, Multiple Catalysts Await Release Although the stock prices of Micron Tech and SanDisk have significantly outperformed the market in 2025 and continued into 2026, Morgan Stanley believes the strong momentum has not yet ended. The report points out that the P/E ratios for both stocks based on CY2027 expectations are below 10x, indicating that valuations are still in a reasonable range with room for further expansion. Morgan Stanley believes that as investors gradually incorporate longer profit sustainability into pricing, the expansion of valuation multiples is expected to become a larger driver of future returns. Recent catalysts listed by Morgan Stanley include: renegotiation of HBM contracts in the second half of 2026, the launch of stock buyback plans starting in 2027 (Morgan Stanley expects Micron Tech's buyback scale to reach $50 billion between FY2027 and FY2028), and the continuous increase in SanDisk's penetration rate in the data center market. Regarding the Long-Term Agreements (LTAs) recently hotly discussed in the market, Morgan Stanley characterizes them as the result rather than the cause of "sustained high-level" expectations, believing that these are strategic commitments actively made by hyperscalers to lock in future supply, which in itself confirms the long-term certainty on the demand side. ## Significant Expansion in Capital Expenditure, Depreciation Pressure Manageable Morgan Stanley's forecast for Micron Tech's capital expenditures is far higher than market consensus. The report expects Micron Tech's capital expenditures for FY2027 and FY2028 to be $44 billion and $40 billion, respectively, while market consensus expectations are $37.6 billion and $36.9 billion, respectively. Morgan Stanley acknowledges that higher capital expenditures will weigh on free cash flow, but its detailed depreciation and amortization model shows that the incremental impact of D&A is financially absorbable. Meanwhile, the bit growth brought by new capacity, in a scenario where the market remains tight, is expected to translate into additional upside potential for revenue and earnings per share. Morgan Stanley raised Micron Tech's target price to $1,050, based on 29.5 times a through-cycle EPS of $35, which is comparable to the overall valuation level of the semiconductor sector, and uses the average profitability from FY2021 to FY2028 as the through-cycle profit benchmark. ### Related Stocks - [SSNGY.US](https://longbridge.com/en/quote/SSNGY.US.md) - [MU.US](https://longbridge.com/en/quote/MU.US.md) - [SMSN.UK](https://longbridge.com/en/quote/SMSN.UK.md) - [ASML.US](https://longbridge.com/en/quote/ASML.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [SNDK.US](https://longbridge.com/en/quote/SNDK.US.md) - [MS-O.US](https://longbridge.com/en/quote/MS-O.US.md) - [MS-Q.US](https://longbridge.com/en/quote/MS-Q.US.md) - [MS-E.US](https://longbridge.com/en/quote/MS-E.US.md) - [MS-I.US](https://longbridge.com/en/quote/MS-I.US.md) - [MS-L.US](https://longbridge.com/en/quote/MS-L.US.md) - [MS-P.US](https://longbridge.com/en/quote/MS-P.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) - [MS-F.US](https://longbridge.com/en/quote/MS-F.US.md) - [MS-K.US](https://longbridge.com/en/quote/MS-K.US.md) - [SNDKV.US](https://longbridge.com/en/quote/SNDKV.US.md) ## Related News & Research - [What's Going On With Micron Stock Monday?](https://longbridge.com/en/news/288293365.md) - [ASML Stock Crushes European Records as JPMorgan Analyst Warns Investors Are "Behind the Curve"](https://longbridge.com/en/news/288601856.md) - [Why Sandisk Stock Is the AI Storage Supercycle’s Biggest Winner](https://longbridge.com/en/news/288587191.md) - [KIDZ AI Announces Reverse Stock Split | KIDZ Stock News](https://longbridge.com/en/news/288714697.md) - [Key facts: Samsung +10% HBM4E; union pact ends strike; 4% 2026 drop](https://longbridge.com/en/news/288340681.md)