JPMorgan: HBM downgrade fears overblown, demand CAGR to stay at 63% from 2026-2028

Key Takeaways:

• HBM bit demand CAGR of 63% expected from 2026–2028
• Supply shortages to persist through 2028, with tightness improving only marginally
• ASIC chips projected to surpass NVIDIA as the largest HBM consumer by 2027
• HBM average selling price to rise 54% in 2027 and 25% in 2028

Supply and Demand Dynamics

JPMorgan has released an updated research report on the HBM storage industry, addressing market concerns over potential HBM spec downgrades. The bank revises its 2026–2027 HBM demand upward while lowering 2028 demand, keeping cumulative three-year bit demand essentially unchanged at 163 billion Gb.

Despite possible spec downgrades, the bank believes HBM supply and demand will remain tight. Key factors include:

• A rising share of 8Hi economy-grade products
• 16Hi technology delayed to at least 2029
• Supply shortage rate improving only slightly from -20% to -16% over 2026–2028
• Cumulative shortage duration continuing to increase

On the supply side, modest increases come primarily from Samsung expanding HBM wafer allocation.

Market Size and Capacity

| Metric | Forecast | |--------|----------| | HBM market size (2027–2028) | $160–$282 billion | | Share of total DRAM revenue for top 3 memory makers | 18–24% | | New DRAM capacity allocated to HBM (2025–2028) | 58% | | HBM share of total DRAM capacity | Rising from 19% to 31% |

Downstream Demand and Customer Shift

A significant shift in the customer landscape is expected:

• 2026: NVIDIA remains the core buyer, accounting for 58% of total HBM demand
• 2027: ASIC custom chips are projected to surpass NVIDIA as the largest HBM consumer

Key projections:

• ASIC server shipments to grow 102% YoY in 2026, far outpacing NVIDIA's 15%
• By 2027, ASIC demand share rises to 48%, while NVIDIA's falls to 43%
• NVIDIA's per-chip HBM capacity remains higher than ASIC, but the capacity premium is expected to narrow

Pricing and Profitability

• HBM average selling price:
• 2027: +54% YoY
• 2028: +25% YoY
• 2028 unit price: $3.8/Gb
• HBM operating margin: Maintained in the 60–70% range
• Lower than server DRAM under long-term agreements
• Significantly improved versus historical levels
• Non-contract product pricing and margins expected to rise through 2028

Technology Roadmap

The industry is moving toward a multi-SKU tiered structure:

• 8Hi: Economy-grade product with extended lifecycle
• 12Hi: Targeting the high-performance market
• TCB: Current mainstream packaging solution
• Customized HBM: Emerging as the next competitive focus
• NVIDIA NVHBM custom product: Expected launch in late 2028

Competitive Landscape

• Samsung and Micron continue to close the gap with SK Hynix
• Combined revenue share of Samsung and Micron expected to reach 59% by 2027
• Tight supply conditions prevent competition from suppressing average pricing
• AI labs including OpenAI and Anthropic developing custom chips represent long-term upside variables not yet priced in

Investment View

JPMorgan maintains a bullish outlook on the memory sector, noting that the market has partially absorbed the negative impact of spec downgrades. Supporting factors include:

• Tight HBM supply-demand balance
• Value enhancement from customization
• Resilient pricing trends

Following recent pullbacks, stock prices have rebounded significantly. The bank prefers SK Hynix based on shareholder return potential, and notes that Samsung's investment case would improve further with increased dividends and share buybacks.