Nomura: 75% Odds AI Arms Race Continues, 2027 Memory Supply Squeeze Locked In

Nomura's global memory research team estimates a 75% probability that the AI investment race continues and the semiconductor upcycle extends, with 2027 memory supply and pricing already locked in through long-term agreements signed in October 2026. Prices have rebounded, and contract penalty clauses—requiring 50% to 100% of annual demand value—raise the cost of order cancellations. Nomura frames the competition as a "Game of Chicken": no tech giant wants to cut capital spending first while rivals keep raising theirs. TSMC (2330-TW) CEO C.C. Wei said on October 15 that AI demand still exceeds supply. Amazon's (AMZN-US) Andy Jassy said $220 billion in 2026 capex cannot meet all 2026-2027 demand. Free cash flow is under strain: Alphabet (GOOGL-US) posted negative $5.9 billion in Q2 2026, Meta (META-US) negative $2.1 billion in Q3, and Amazon negative $7.6 billion for the 12 months to June. Nomura assigns 20% odds to a capex slowdown and 5% to financing failure.