Diamonds are losing their luster and the lab-produced boom appears to be the main culprit, the source says. What’s more, the turmoil could be permanent.

Lab-grown diamonds, which are virtually indistinguishable from natural stones and sell for a fraction of the price, had a chilling effect on the natural diamond market when they experienced an unprecedented boom during the pandemic. Sales of natural diamonds fell, a drop that many analysts dismissed, believing that artificial stones were a fad and that a recovery was coming.

But what has actually happened is a recession that jewelers say is unlike anything they’ve seen before, with the lab-generated craze apparently splitting the natural diamond market into two halves: one made up of cheaper, defective stones and the other half made up of a narrow band of large or unique gems that can still command a premium.

No one is sure how it will play out, but the latest changes could represent a new secular chapter for diamonds, analysts told Business Insider, pointing to the myriad reasons that could prevent demand for natural stones from rising much further.

The industry has already glimpsed what a new reality could look like. The Diamond Standard Index, which tracks the price of investment grade diamonds, fell to its lowest level this spring, with prices falling 68% from their peak in 2011.

Meanwhile, preference for artificial diamonds over natural stones has increased. Global demand for natural diamond jewelry remained stable in 2025, a stabilization that followed three consecutive years of decline, according to data from diamond miner De Beers.

By comparison, unit sales of lab-grown diamonds between 1.05 and 1.09 carats grew 3% year over year in 2025, according to data from Tenoris, a diamond and jewelry analysis firm.

Dan Mano, chief executive of diamond analysis firm Rapaport, said select groups of diamonds have remained more resilient than others amid the crisis. Large natural diamonds are performing the best, as they are able to withstand the “competitive pressure” of lab-grown pieces, he said.

Natural diamonds weighing between 2.5 and 2.74 carats were the fastest-growing category last year, with sales increasing 19%, according to Tenoris. Large diamonds are generally considered to weigh 2 carats or more.

By comparison, sales of diamonds of 1.99 carats or less overall contracted last year.

“The diamond market is increasingly divided,” Mano said. “The broader picture remains challenging and continues to vary significantly by category.”

Edahn Golan, a diamond analyst and managing partner at Tenoris, also said it appeared the natural diamond market was splitting.

In addition to large stones, some smaller or low-color diamonds have also deviated from the widespread decline, Golan said. He noted the popularity of brown diamonds, which are often marketed as distinctive, imperfect gems that stand out.

Unit sales of half-carat brown diamonds were up about 200% year-over-year in May, Golan said, citing data from Tenoris.

“They don’t call it brown. They give it all kinds of really cute trade names,” Golan said, pointing to terms like “champagne,” “cognac” and “chocolate” diamonds as ways to describe off-color stones to pique consumers’ interest.

Elongated diamonds, such as those with an oval or marquise shape, are another rare and resilient category in the natural diamond market, Paul Zimnisky, another diamond analyst, told Business Insider. He estimated that diamonds with these shapes had seen a price increase of around 25% in recent years.

“These are diamonds that tend to sell for well over $10,000, so there’s definitely a bit of a K-shaped recovery going on,” Zimnisky said.

“The industry has been affected on all fronts”

The devastation caused by lab-grown stones is largely due to how artificial diamonds have taken over a critical entry point into their market: middle-class consumers who buy engagement and wedding rings, Golan said.

Lab-grown stones now appear to be on the rise among honeymooners, many of whom are attracted to the ethical advantage of lab-grown diamonds and are looking for ways to cut costs.

Lab-grown stones accounted for 61% of engagement ring purchases last year, an increase of 239% compared to 2020 levels, according to a survey by wedding planning platform The Knot.

Meanwhile, 85% of respondents said the state of the economy had impacted their wedding planning decisions.

“It hurts the diamond industry in the most painful category,” Golan said.

This explains why large natural diamonds have been the most resilient category, as consumers who can easily afford them have continued to purchase them, Golan added.

The rise of lab-grown stones has also coincided with a series of headwinds that have hit the natural diamond market. China, one of the world’s largest diamond markets, saw its luxury personal goods market shrink by up to 5% last year, according to an estimate by consulting firm Bain & Company.

Marriage rates are also declining around the world. About 47% of American households last year were made up of married couples, up from 66% of households a half-century ago, according to census data.

Lab-grown stones have done much to “devalue” people’s perception of a diamond’s value, Zimnisky said. “The industry has been affected on all fronts.”

Zimnisky said there could be a recovery for natural diamonds, although he is unsure of the timeline. Lab-created rings are simply becoming too ubiquitous, he said, referring to how many people tend to assume that a large, high-quality diamond is man-made these days.

“People are starting to want something real again,” he said.

Other forecasters are less sure when or if a rally will occur.

Joshua Freedman, senior diamond analyst at Rapaport, said the decline in natural diamonds so far looks like a secular shift in the market.

“I think people have come to the conclusion that this is not just a cyclical slowdown. It’s a more fundamental crisis that’s happening in the diamond industry,” Freedman said.