Investors in major hardware companies like Apple, HP, and Dell face growing concerns over escalating memory prices. The surge in costs for memory and storage components is squeezing these manufacturers, putting significant pressure on their profit margins. This trend stems from what analysts describe as an unprecedented shortage in memory chips, driven by massive demand that shows no signs of easing soon.
An Unprecedented Chip Shortage Crisis
According to a December 2025 report from IDC, the current situation differs from typical boom-and-bust cycles in the industry. Francisco Jeronimo, an IDC analyst, highlighted that this is not just a temporary mismatch between supply and demand. Instead, it represents a potentially permanent shift in the global allocation of silicon wafer capacity. This strategic reallocation creates a crisis for device makers, as limited supply pushes chip prices to sky-high levels.
Impact on Consumer Hardware
Memory components can account for 10% to 20% of material costs in consumer-facing hardware such as smartphones. This substantial portion means any price increase directly hits the bottom line of companies like Apple. Last week, Hedgeye Risk Management expressed reduced confidence in Apple due to these mounting memory issues. The effects are even more severe for PC manufacturers.
In November, HP provided a profit outlook that fell short of expectations. Company executives estimated that higher memory costs would slash its 2026 adjusted earnings per share by 30 cents. Katherine Murphy, a Goldman Sachs analyst, noted that HP is the most exposed name in their coverage to secular pressures on PC margins and demand. She expects pricing actions to offset these higher input costs, which could materially impact purchases by lower-end consumers in the second half of 2026.
Financial Strain and Market Reactions
Over the past month, the general estimate for HP's 2026 net earnings per share has been cut by 7.1%, according to Bloomberg data. Dell also acknowledged the impact of rising memory prices in its results, though its estimates have held up better. This resilience partly comes from strong demand in Dell's server business amid the ongoing AI buildout.
Paul Meeks, managing director and head of technology research at Freedom Capital Markets, told Bloomberg that over the next two years, memory cost increases will even affect a company as large as Apple. While memory prices are cyclical, the current scarcity in supply means a reversal is unlikely soon.
Market performance reflects these challenges. Apple shares rose just 8.6% in 2025, marking its worst performance since 2022, and are down 4.2% to start this year. This places Apple among the 20 weakest stocks in the Nasdaq 100 Index. HP shares recently closed at their lowest level since November 2020 after losing nearly a third of their value in 2025 and dropping another 6.8% early in 2026. Dell Technologies Inc. has fallen 26% since its October all-time high. In recent trading, Apple shares rose 0.1%, HP fell 0.3%, and Dell gained 1.7%, helped by TSMC results boosting AI-related names.
Broader Industry Implications
The memory price surge also poses risks for chipmakers supplying semiconductors for smartphones. Recent downgrades of Qualcomm by Mizuho Securities and Arm Holdings Plc by Bank of America highlight these concerns. Meanwhile, memory manufacturers are benefiting from the price increases.
Last week, Samsung Electronics Co. reported that average selling prices for DRAM chips jumped more than 30% quarter-over-quarter. NAND flash memory chips rose about 20%. These higher prices, expected to continue throughout 2026 or longer, helped Samsung's profits more than triple.
The Tough Choices for Hardware Makers
Rob Thummel, senior portfolio manager at Tortoise Capital, explained the difficult position for companies like Apple, HP, and Dell. They face two main options: absorb the hit to margins, which the market dislikes, or raise prices to offset higher memory costs, risking reduced demand. Thummel added that as long as memory prices remain high—likely due to AI demand—the market could continue punishing these companies. Among the group, he remains positive only on Dell, where server business growth helps counter the memory headwind.
Winners in the Memory Market
In contrast, memory and storage companies are thriving in 2026. Sandisk, Western Digital, Micron, and Seagate Technology Holdings Plc have built on their 2025 rallies, benefiting from the price surge. These firms have become some of the market's top-performing stocks over the past year. Sandisk leads the S&P 500 to start the year, up about 75%, with Western Digital and Micron among the index's top 20 performers.
The ongoing memory chip shortage and price increases present a significant challenge for hardware giants, forcing tough decisions that could reshape consumer pricing and market dynamics in the coming years.
