High-bandwidth memory demand set to surge in 2026 as AI powers up: UBS

Investing.com -- High-bandwidth memory, or HBM, is poised for a breakthrough year in 2026 as AI’s compute-hungry needs continues to reshape the memory landscape, UBS analysts said in a recent note.

“Our channel checks continue to indicate that SK Hynix Inc (KS:000660) will likely secure a largely stable market share in the HBM market in 2026 around 50% of total bits,” the analysts said, underscoring its expectation that Hynix will keep its grip on next-generation memory, even as contract negotiations and rival ambitions swirl.

While short-term noise, particularly around NVIDIA (NASDAQ:NVDA)’s negotiations with high-bandwidth memory suppliers including SK Hynix, Samsung (KS:005930), and Micron Technology Inc (NASDAQ:MU), and possible pricing “pushback” as Samsung inches closer to HBM3E qualification, UBS beleives the real story is in the pipeline. Hynix’s leadership with Nvidia is set to hold, while a fresh slate of design wins at the ASIC arms of Google (NASDAQ:GOOGL), AWS, and Microsoft (NASDAQ:MSFT) suggests Hynix will be locked in as the main or sole HBM supplier across the sector. Even as competition is expected to be heat up, it is unlikely to become a serious headwind for Hynix until late 2026.

The strong HBM demand has AI’s fingerprints all over it: AI is driving an unprecedented appetite for memory, from the cloud giants and Nvidia’s broader customer base to a revived group of tier-2 and tier-3 GPU buyers, especially as H20 exports to China resume. UBS points to TSMC’s latest call as evidence that AI demand is running well ahead of earlier forecasts, and notes that HBM bit shipments are projected to jump 35% next year to 17.1 billion gigabits.

On the pricing front, there is room for some negotiation around HBM3E as more suppliers come online, but Hynix expects only a “minimal to modest downtick” for 2026 compared with 2025. Far more important is the premium secured by first-mover advantage on HBM4, where Hynix expects to command prices roughly 40% higher than its outgoing generation—even after absorbing a 50% rise in cost per bit. Overall, UBS forecasts blended HBM pricing per bit to rise 18.5% year-on-year in 2026, driving HBM revenues to a projected $32.7 billion, and accounting for over 70% of SK Hynix’s operating profit.

Yet the HBM story isn’t without risk. Samsung’s delayed ramp could inject more competitive tension as the year goes on, and the steep increase in production costs for HBM4 could lead to more intense price talks further out. Investors are also watching capex closely, as Hynix’s expansion plans will depend on how Nvidia’s next-generation Blackwell Ultra and Rubin product cycles unfold. Even so, SK Hynix is trading at just 1.79 times its forecast next-twelve-month book value, a discount to UBS’s average long-term return on equity estimate of 23.4%.

For all the near-term noise, the 2026 outlook for HBM remains robust, with Hynix expected to remain dominant. "We see upside in overall cloud AI demand... the stock is not discounting our LT ROE average estimate (‘26-30E) of 23.4% (CoE 10.1%)," UBS said.