The DRAM correction that began in late 2024 is approaching its trough. Inventory levels at the top five DRAM manufacturers have normalised to approximately 6 weeks from a peak of 14 weeks at the cycle's worst point. What happens next depends heavily on how AI infrastructure demand interacts with the traditional inventory replenishment cycle.
Three scenarios for year-end
In our base case, AI server demand absorbs the incremental DRAM supply coming online in Q3 and Q4, keeping prices stable and supporting modest capex growth from the major ODMs. In the bull case, hyperscaler AI capex accelerates faster than current guidance and creates a spot shortage by Q4. In the bear case, enterprise IT spending softens and the traditional PC/server cycle weighs on prices even as AI demand grows.
What to watch
The key variable is hyperscaler capex guidance in Q2 earnings calls. Any upward revision to AI infrastructure spending from the major cloud providers will pull forward the inventory cycle recovery and support equipment supplier valuations.