By: Dave Dimlich
President of SD3IT
It’s one thing everybody is talking about that nobody really wants to hear: The AI-driven memory chip shortage is threatening to paralyze the industry well into 2027, with ripple effects that could disrupt other industries as well.
The rising demand for AI data centers, which require copious amounts of memory, has turned chip production upside-down. Manufacturers, which have long prioritized consumer electronics, are now reducing production capacity for the DRAM and NAND memory used in smartphones and other devices and ramping up production of data center memory such as high-capacity DDR5, which offers higher density, faster speed and greater bandwidth. Data centers are expected to consume 70% of all memory chips produced this year, according to a Wall Street Journal report.
As a result, the demand for memory used in phones, PCs and other devices is exceeding supply, driving up prices. TrendForce reported that prices for DRAM—dynamic random access memory, the most common type of RAM—jumped by 53% to 58% during the fourth quarter of 2025 and are predicted to increase another 60% in the first quarter of 2026. Some categories of chips are already seeing as much as 300% price increases, something that has never happened before over such a short period of time.
The industry has gone through shortages before, but never to this extent. During the COVID-19 pandemic, for instance, major supply chain issues cropped up because China, which produces a lot of raw components, shut their factories down. That bottle-necked the supply chain to the point that a well-known networking company which reliably took 30 to 45 days to deliver products, was taking 8 to 14 months. What we’re being told now is that the problems experienced due to COVID-19 will be nothing compared to the pending memory shortage.
The acute shortage of memory also could affect other industries from transportation and healthcare to entertainment and home goods. After all, planes, automobiles, health monitors, TVs and practically everything else these days runs on RAM. This could even become a national security issue if key components and devices can’t be manufactured within any reasonable amount of time.
Panic and Uncertainty Grips the Industry
Organizations are beginning to gobble up available memory, panic-buying capacity they don’t currently need to avoid price hikes that are right around the corner, or because they’re afraid they won’t be able to get anything at all a year from now. A leading compute OEM has said many of its customers have already placed a whole year’s worth of orders.
More than just exacerbating the shortage, panic-buying could have other consequences. For one thing, IT companies, including established heavyweights, are projecting lower-than-expected revenue for the end of the year because the shortage will affect their ability to meet the demand for new data centers to feed the artificial intelligence behemoth. Intel issued just such a report on Jan. 22, and saw its shares fall 17%.
The potential fallout from the shortage also creates uncertainty about what comes next. Projections on the shortage are based on current chip-making capacity, which may not remain static. It’s possible that manufacturers could add factories to boost capacity, which may be why 2027 is considered the target date for “getting back to normal” in the industry. But there’s also the question of whether there can ever be a new normal because of the way the infrastructure needs are growing for AI. The answer is unknown.
You also have to take into account the fact that AI projects don’t always succeed. Hyperscale data centers may find that they over-bought capacity for AI projects that aren’t making them any money. So, they may stop buying memory for a while, which is another way to change the market.
Surviving a Perfect Storm
The way it looks right now, the elements are coming together to form a perfect storm for a major memory and supply chain shortage. The impact of those shortages will be felt for a long time across many industries and fields.
And that’s why we at SD3IT are out there innovating and using our expertise to help our partners weather and survive the pending storm.
In an environment where memory is no longer cheap or plentiful, success will depend less on who can buy the most hardware and more on who can make the smartest use of what is already in place. Many organizations are discovering that the systems they own are capable of far more than they were originally designed to deliver, if they are properly tuned, reconfigured and aligned with real operational needs. Knowing how to do that effectively, however, requires experience across platforms, workloads and use cases that most organizations do not maintain in-house.
The same is true for AI and analytics initiatives. As supply constraints tighten, organizations are being forced to move away from one-size-fits-all deployments and toward more intentional architectures. Not every workload requires premium, high-density memory and not every AI project needs to scale at full throttle on day one. A partner like SD3IT who understands how to design phased deployments, balance performance against cost and match workloads to the right infrastructure can help organizations continue moving forward without overextending budgets or chasing scarce components.
Flexibility will also be critical as availability fluctuates. Organizations tied to a single platform, configuration or supplier may find themselves boxed in as conditions change. Working with a VAR that can aggregate solutions across multiple vendors and ecosystems gives organizations options that can cut through scarcity, allowing them to adapt without having to rethink their entire strategy midstream.
Waiting until the typical year-end timeline of June to September to place these carefully considered orders is not wise this year. Quotes from OEMs are rarely going to be valid for any more than 30 days, and in the case of some OEMs it has only been seven. Heading into this shortage with your eyes open while acting early and decisively will minimize both mission impact and any adverse national security implications. Because even Defense Contract Management Agency (DCMA) and Defense Priorities and Allocations System (DPAS)-rated orders will be affected by this global condition.
Perhaps most importantly, this moment calls for discipline rather than panic. Overbuying capacity out of fear can lock up capital, create inefficiencies and leave organizations exposed if the market shifts again. A measured approach, guided by realistic forecasting and informed by an experienced partner who has navigated similar disruptions before offers a far steadier path through uncertain conditions.
The organizations that make it through this storm will not be the ones that react the fastest, but those who can make the smartest adjustments. By working with a partner like SD3IT who knows how to optimize infrastructure, aggregate solutions and innovate under constraints, organizations can stay upright through the supply chain turbulence and emerge much better positioned for what comes next.
To explore more insights on innovation, technology trends and issues shaping the IT landscape today, visit the Inside The Mission With SD3IT Blog pages where we regularly share practical perspectives from the field. As these challenges grow more complex and timelines continue to tighten, organizations should take time to reassess and prioritize their most mission-critical needs. To learn more about SD3IT and how we help organizations plan and act decisively in uncertain conditions, visit our website or reach out and contact us to start the conversation.
