"Victims" of the price increase trend in storage: Consumer electronics manufacturers are trapped in a cost quagmire, with companies like Apple Inc. (AAPL.US) and HP Inc. (HPQ.US) facing profit impacts.

Over the past year, storage chip prices skyrocketed, making companies like Sandisk (SNDK.US), Micron Technology, Inc. (MU.US), and Western Digital Corporation (WDC.US) the hottest stocks in the market. However, this has also caused trouble for many of their customers. From Apple Inc. (AAPL.US) to HP Inc. (HPQ.US), consumer hardware manufacturers are facing pressure as their demand for expensive memory components has become an investment risk - and this risk is not expected to reverse in the short term. Rob Thummel, Senior Portfolio Manager at Tortoise Capital, said: "They are in a difficult situation. They basically have two choices: either accept a decline in profit margins, which the market will not like; or raise prices to offset higher memory costs, but this may harm demand." Tortoise Capital manages $9.1 billion in assets and operates an exchange-traded fund focused on artificial intelligence infrastructure. The surge in memory demand has led to what technology research firm IDC calls an "unprecedented memory chip shortage," which the company believes is a "crisis" for device manufacturers as the supply shortage has led to skyrocketing chip prices. Apple Inc. shares rose by only 8.6% in 2025, marking their worst performance since 2022, and fell by 4.4% at the beginning of this year, ranking among the 20 worst-performing stocks in the Nasdaq 100 index. HP Inc. shares closed on Wednesday at their lowest level since November 2020, after falling by nearly a third in 2025 and another 6.8% at the beginning of 2026. Dell Technologies, Inc. Class C (DELL.US) shares have fallen by 28% since reaching an all-time high in October. The increase in memory prices also poses risks for chip manufacturers providing semiconductors for smartphones, as Mizuho Securities recently downgraded Qualcomm (QCOM.US) and Bank of America Corp also downgraded Arm (ARM.US) to reflect this. Thummel said, "As long as memory prices remain high (given the demand for artificial intelligence, we expect prices to remain high for some time), the market may continue to pressure them." Of the stocks in the industry, he is only bullish on Dell Technologies, Inc. Class C, as the growth of its server business offsets the adverse effects of rising memory prices. In contrast, storage device companies have shown strong performance at the start of 2026, with Sandisk, Western Digital Corporation, Micron, and Seagate Technology Holdings PLC (STX.US) continuing their upward trend from 2025. Sandisk leads the S&P 500 index, with a gain of over 60% at the start of the year, while Western Digital Corporation and Micron also rank in the top 20 gains in the index. Samsung Electronics reported last week that the average selling price of DRAM chips had risen by over 30% compared to the previous quarter, while the selling price of NAND chips had also increased by around 20%. It is expected that this price increase trend will continue into 2026 and beyond, driving Samsung's profit growth by over three times. In a report in December, IDC analyst Francisco Jeronimo wrote: "For an industry that has historically been characterized by cycles of prosperity and recession, this time is different. This is not just a cyclic shortage caused by a mismatch of supply and demand, but a potential permanent strategic reconfiguration of global silicon wafer production capacity." According to Jeronimo, memory costs may account for 10% to 20% of material costs in consumer-facing hardware products such as smartphones. Last week, Hedgeye Risk Management said that as memory issues become increasingly concerning, their confidence in Apple Inc. has "decreased." Personal computer manufacturers are expected to be more severely impacted. In November last year, HP Inc. reported earnings below expectations, with company executives estimating during a conference call that expected growth in memory costs would reduce its adjusted earnings per share by 30 cents in 2026. Goldman Sachs Group, Inc. analyst Katherine Murphy wrote in a report to clients on Tuesday that HP Inc. is "the most easily affected company within our coverage range by long-term profit margin and demand pressures in personal computers." She expects that price hikes to offset rising costs of memory chips and other raw materials will have a "substantial impact" on the volume of low-end consumer PC purchases in the second half of 2026, as HP Inc. has a larger market share in this area than Dell Technologies, Inc. Class C. Data shows that over the past month, the market has generally lowered its expectations for HP Inc.'s 2026 earnings per share by 7.1%. Dell Technologies, Inc. Class C has also noted the impact of rising memory prices on its performance, but due to the rapid growth of artificial intelligence driving strong demand for server business, its performance outlook has remained relatively better. Paul Meeks, Managing Director and Head of Technology Research at Freedom Capital Markets, said, "In the next two years, the increase in memory component costs will be significant, even impacting companies the size of Apple Inc. The good news is that memory prices are cyclical, but with supply currently so scarce, I expect prices to not make a downturn in the short term."