It's one thing when the memory stocks are soaring. It's another thing when you can't get an iPhone.
We wrote two weeks ago about the jaw-dropping moves in names like SanDisk, Micron, and SK Hynix as it becomes clear that memory chips are the biggest bottleneck on AI capacity right now. SanDisk shares have doubled...this month! They priced around $52 in their spinoff last year, and closed at $503 yesterday. Wild.
It's all well and good if you're a shareholder. The analysts following these names say we're nowhere near the end of this upside move. "We had been in a seven-year down cycle," Cantor Fitzgerald's C.J. Muse told us yesterday. "I think we're going to be undersupplied for all of '26 and '27."
But that supply crunch is about to get really real for buyers. While the voracious new demand is happening way up high in the AI space, it has squeezed supplies for all kinds of memory chips up and down the supply chain. Memory prices are soaring, which is why the stocks are flying. But PC prices as a result are expected to rise 15-20% this quarter!
This could eventually even pass through to auto prices and yes, could mean more production disruptions by 2028, according to one analysis. It takes years for plants that will add more capacity, like the mega $100 billion Micron project in upstate New York, to come online.
"Our working assumption is that PC unit volumes will decline 10% this year, and that smartphone unit volumes will decline at least 5% because there's not enough memory chips," Muse told us. I asked him if that could possibly explain why Apple shares have been on an eight-week losing streak. He didn't rule out a potential impact on iPhone sales this year.
"What is less well-known is the pain that's coming to the handset market," he added, and said he expects customers will trade down to cheaper phones with less memory, which could affect suppliers like Qualcomm. Sure enough, Qualcomm shares are down 25% from their October highs.
The race to win in AI is not just pitting the Mag 7 against each other, as we talked about yesterday--it's also creating new headaches for the more mature parts of the tech industry.
See you at 1 p.m!
Kelly