Global technology hardware giants are confronting a severe "profit protection war," experiencing dramatic industry divergence as the prices of memory components skyrocket. While memory chip manufacturers are enjoying explosive profit growth, downstream device makers in the supply chain are forced into a difficult choice: sacrifice profit margins or risk suppressing demand by raising prices.

This imbalance is starkly evident in the latest financial data. Performance figures released by Samsung last week showed the average selling price for Dynamic Random-Access Memory (DRAM) jumped more than 30% quarter-over-quarter, while prices for non-volatile NAND flash chips also rose by approximately 20%. This price surge helped more than triple Samsung's profits, with this upward trend expected to persist throughout 2026.

This AI-driven wave of price increases, described by technology research firm IDC as an "unprecedented memory chip shortage," is seen as a "crisis" for device manufacturers. The market reaction has been severe: after its worst annual performance since 2022, Apple's stock fell another 4.4% at the start of 2026, ranking among the weakest performers in the Nasdaq 100 Index; HP Inc's stock dropped to its lowest level since November 2020.

Analysts point out that the current shortage is not a traditional cyclical fluctuation but rather a strategic reallocation of global silicon wafer capacity. This implies that the cost pressures facing hardware manufacturers will be difficult to alleviate in the short term, forcing them to foot the bill in this memory industry feast.

The past year of soaring memory component prices has created a tale of two cities in the US stock market. On one hand, memory-related stocks like those of SanDisk, Micron Technology, and Western Digital have been big market winners. Entering 2026, SanDisk led the S&P 500 with a gain of over 60%, while Western Digital and Micron also ranked among the top performers.

On the other hand, hardware giants are mired in difficulties. Apple's stock rose a mere 8.6% in 2025 and continued to decline at the start of the new year. After losing nearly a third of its market value in 2025, HP Inc fell another 6.8% early in 2026. Dell has seen its stock price drop 28% since hitting a record high last October.

Rob Thummel, a senior portfolio manager at Tortoise Capital, noted that these hardware companies are in a "tough spot." He stated that as long as memory prices remain elevated—which is expected to continue for some time due to AI-driven demand—the market will likely continue to punish these stocks.

For consumer-facing hardware products, memory components are not only critical parts but also represent a major portion of costs. IDC analyst Francisco Jeronimo pointed out that memory typically accounts for 10% to 20% of the bill of materials cost for hardware like smartphones. As costs surge, corporate profit expectations are being rapidly revised downward.

The impact on HP Inc has been particularly significant. Company executives estimated on an earnings call that rising memory costs would reduce its 2026 adjusted earnings per share (EPS) by 30 cents. Data compiled by Bloomberg shows that consensus estimates for HP Inc's 2026 net EPS have been downgraded by 7.1% over the past month.

Goldman Sachs analyst Katherine Murphy wrote in a client report that HP Inc is the most exposed company in her coverage to PC margin and demand pressures. She expects that price increases implemented to offset rising input costs, including memory chips, will have a "material impact" on low-end consumer PC purchases in the second half of 2026.

Even Apple, with its strong pricing power, is not immune. Paul Meeks, Head of Technology Research at Freedom Capital Markets, stated that the magnitude of memory component cost increases over the next two years will be significant enough to impact even a company of Apple's scale. Hedgeye Risk Management also indicated last week that its confidence in Apple is waning as memory issues intensify.

The nature of this supply shortage is causing particular concern in the market. IDC believes this differs from the typical "boom-and-bust" cycles of the past. Francisco Jeronimo wrote in a report that this time is different; it is not just a cyclical shortage driven by supply-demand mismatch but a potential, permanent strategic reallocation of global silicon wafer capacity.

This structural shift implies that price pressures will not quickly dissipate. Paul Meeks noted that while memory prices are cyclical, current supply is extremely scarce and a reversal is not expected soon.

This pressure has even spread to chipmakers supplying semiconductors for smartphones. Due to risks associated with rising memory prices, Mizuho Securities and Bank of America recently downgraded Qualcomm and Arm, respectively. Within this sector, Rob Thummel remains optimistic only about Dell, citing growth in its server business as a partial offset to the headwinds from memory costs.