Major players in the AI industry shift towards storage giants becoming leaders

The surge in artificial intelligence (AI) spending has sparked a significant shift in the investment landscape. According to a recent report by Jefferies, investors are now directing their attention towards key component suppliers in the AI sector, moving away from the traditional focus on hyperscale platforms. This change comes as the AI boom continues to create winners in the industry, with memory producers gaining notable pricing power.

In his report titled ‘Greed & Fear,’ analyst Christopher Wood highlighted that the ongoing surge in AI spending has entered a new phase. Unlike before, pricing power is no longer concentrated in chip designers or cloud platforms but has shifted towards memory producers. The rise in global memory prices in the first half of 2025 has been substantial, leading to continuous surges in spot and contract prices. Consequently, stock prices of major memory giants like SK Hynix and Micron have experienced significant increases.

The release of this report coincides with the upcoming fourth-quarter earnings reports of major storage companies like Samsung, SK Hynix, Seagate Technology, and Western Digital. These reports are expected to shed light on the industry’s prospects and the continuation of the AI-driven memory ‘super cycle.’

Jefferies also highlighted a noticeable divergence in stock performance within the AI sector. While shares of large hyperscale data centers and AI platform leaders have lagged since late October, memory producers and semiconductor manufacturers have seen substantial surges in their stock prices. The increase in memory prices by approximately 50% last quarter has further strengthened the bargaining power of suppliers in the AI supply chain.

However, this advantage comes with rising costs, as constructing new chip fabrication plants now requires investments worth tens of billions of dollars. Some memory producers are urging customers to share these costs in exchange for guaranteed supply. This shift in the industry dynamics has already been reflected in the stock market, with several large cloud computing and internet companies experiencing drops in their share prices despite extending their capital expenditure plans.

Looking ahead, Jefferies anticipates significant growth in capital expenditures for hyperscale cloud service providers in 2026, which could lead to increased pressure on these companies to deliver returns. The firm emphasizes that while memory suppliers are expected to emerge as short-term winners, caution should be exercised towards companies heavily investing in AI infrastructure without clear evidence of profitability.

In summary, the AI sector is experiencing a significant evolution, with memory producers gaining prominence in the investment landscape. As the industry continues to grow, investors must carefully monitor developments to navigate the changing dynamics of the AI market.