The hidden cost of AI

Memory prices are soaring, and you might be the one footing the bill.

The surge is being driven by exploding demand for memory chips as companies race to build massive AI data centers, where servers require enormous amounts of memory to train and run models. As tech giants absorb a growing share of global supply, availability for smartphones, PCs, and gaming consoles shrinks, tightening the market and pushing costs higher for consumer electronics makers.

The cost crunch

At the center of it all are two components: DRAM for multitasking, and NAND flash for storage. Over the past year, contract prices for both have risen about seven times over, forcing manufacturers to absorb higher costs, raise prices, or cut memory.

PC makers are especially exposed, with memory accounting for as much as 30% of total build costs. Dell Technologies has lifted prices on some commercial laptops, Acer is offering models with less RAM, and Lenovo has warned the spike could dampen demand.

Meanwhile, smartphone companies face a similar problem: Apple, Samsung, and Xiaomi have all pointed to a tougher cost backdrop, weighing slimmer margins against trimming memory in new releases.

The squeeze is hitting at a particularly delicate moment, as companies push deeper into AI features that require more memory. It’s shaping up as a real test of which firms can manage the pressure, and which get left behind.

Winners and losers

Since the end of September, a Bloomberg gauge of global consumer electronics companies has fallen 10%, while memory-chip makers have surged, with SK Hynix up more than 150%, Kioxia Holdings and Nanya Technology each climbing over 270%, and Sandisk jumping more than 400%.

“Historically the memory cycle normally lasted 3-4 years,” Jian Shi Cortesi, fund manager at GAM Investment Management, told Bloomberg. “The current cycle already exceeded the previous cycles both in length and magnitude, and we are not seeing demand momentum softening.”

So if your next iPhone costs a little more, you know who to thank.—SY