AI is causing a memory shortage. Why producers aren’t rushing to make a lot more.

The world needs a lot more memory chips and hard drives.

- Dan Gallagher [e-mail]

Flash memory maker Sandisk's stock price has soared since last February.

(BLOOMBERG)

The companies making those products have very good reasons not to rush the job.The boom-and-bust memory business has been enjoying its biggest boom in years—perhaps ever. The rapid build-out of infrastructure for artificial intelligence is consuming a large portion of available supply of NAND flash memory, DRAM memory and hard drives. That has resulted in a shortage of memory for other markets such as PCs and smartphones. “Memory is in the midst of a generational supply and demand mismatch,” Morgan Stanley chip analyst Joe Moore wrote in a report last month.

Tight supply is driving up prices and sharply boosting revenue and earnings for memory producers. Micron posted record quarterly revenue and operating income last month, while Samsung said Thursday that its fourth-quarter operating profit is expected to triple on a year-over-year basis.

A severe market shortage accompanied by sky-high prices would normally compel manufacturers to sharply boost their production. But memory companies have been burned by sharp price swings in the past and will therefore be cautious in their response this time.