Global memory shortage adds fresh uncertainty for tech stocks
What's the story
The ongoing memory chip price surge is creating a huge disparity in the stock market, with no signs of abating. Companies like Apple, Nintendo and major PC brands are witnessing a dip in their shares due to profitability concerns. On the other hand, memory producers are witnessing unprecedented growth, leaving money managers and analysts to figure out how these firms can best navigate this crisis by securing supplies or increasing product prices.
Stock fluctuations
Disparity in memory chip prices
The market has already been bracing for the impact of rising memory chip prices. A Bloomberg gage tracking global consumer electronics makers has fallen 12% since late September, while a basket of memory makers including Samsung Electronics has skyrocketed over 160%. Vivian Pai, a fund manager at Fidelity International, said current valuations largely assume that this disruption will normalize within one to two quarters. However, she believes industry tightness could persist possibly through the rest of the year.
Corporate challenges
Major companies affected by price surge
Memory chip shortages and pricing are frequently mentioned in earnings reports and conference calls, ringing alarm bells for investors. Qualcomm's shares fell over 8% last Thursday after the smartphone processor maker warned that memory constraints would limit phone production. Nintendo's shares also witnessed their biggest drop in 18 months after it warned of margin pressure from these shortages.
Market response
Logitech's stock slide due to higher chip prices
Swiss peripherals maker Logitech International SA has seen its stock slide some 30% from a November peak due to higher chip prices affecting PC demand. Chinese electric vehicle and smartphone makers such as BYD and Xiaomi Corp. have also been sluggish owing to concerns over these chip shortages. Charu Chanana, chief investment strategist at Saxo, noted that memory prices have gone from a background conversation to headlines this earnings season.
Supply chain impact
AI infrastructure spending exacerbates memory-chip shortages
Concerns over demand and earnings are weighing on the corporate landscape, compounded by worries that massive AI infrastructure spending by US hyperscalers will further exacerbate memory-chip shortages. The massive build-up of AI infrastructure led by Amazon Inc. has shifted production capacity toward high-bandwidth memory and away from traditional DRAM. This has created a "supercycle," breaking the usual boom-to-bust patterns of memory supply and demand.
Price escalation
Memory chip makers see significant gains
Spot prices for DRAM have surged over 600% in recent months, despite weak end-product demand for smartphones and cars. AI is also creating new demand for NAND chips and other storage products, pushing up costs in those segments too. This has made memory chip makers the standout winners among tech stocks with SK Hynix Inc., a key supplier of HBM to NVIDIA Corp., seeing its shares rise over 150% since late September.