AI RAMageddon: Why Apple Just Raised Prices

Welcome back. This morning, Apple took its online store down for a few minutes. Normally, that means a new product is coming. But this time, nothing was new, just the prices. Everything was more expensive by about 15-20%. MacBook Air, up by $200. MacBook Pro, up $300. iPads, up by an extra $200. Same machines as yesterday, higher prices worldwide overnight. Apple tried to explain, We have never seen a component price increase this much this quickly. We've now reached a point where we need to begin raising prices. So the reality is, this is the end of affordable computing, and it is industry-wide. Apple is just the latest to get hit by skyrocketing memory prices. And this is going to change how you buy every computer, phone, and console for the next few years, whether or not you even touch AI. So what actually broke? It's the most boring part of your computer. Memory. In the first three months of this year, the price of RAM nearly doubled. Morgan Stanley says memory is up roughly six times over the past year, and people in the industry are calling it RAMageddon, which is a stupid name for something that's actually going to cost you real money. So here's what happened, and it's worth understanding because this is chronic. So the fancy memory that AI chips need is made in the same factories by the same three companies, Samsung, SK Hynix, and Micron. That make the ordinary memory in your laptop too. And those three are basically the entire world's supply. And AI memory sells for far more than consumer gadgets, so they just put their factories at that instead. Now when Micron makes one batch of AI memory, it gives up making about three batches of the normal kind. So every chip going into a data center is three that never make it to your laptop. You can see how this gets bad. The supply got pointed somewhere more profitable, and you're standing at the back of the line. The people who run those factories, by the way, are doing great. Micron reported earnings the same week Apple raised prices with their margins up over 80%. Apple meanwhile down 6% today. So your more expensive MacBook and iPhone are someone else's record quarter. And it's not just Micron that clear a sign of how upside down this is, is a company called SanDisk. A year ago, it just made SD cards for your cameras, boring storage nobody cared about. Then AI data center started inhaling storage, and SanDisk stock went up nearly 50x over the past year, the best performing stock in the entire S&P 500. Not because it cured cancer, but because it's making the memory that AI is starving for and almost nothing else. When an SD card company is your market's biggest winner, well, that tells you exactly where all the money is going. So why couldn't Apple do anything? And this is the part that should actually bother you. Apple has the best supply chain on earth and it still couldn't hold the line. So if Apple is raising prices overnight, well everyone else is already drowning. And they are. Dell, HP, and Lenovo already pushed PC prices up 15-20%. Phone makers are quietly shipping new models with less memory than last year's for the same price, hoping you didn't read the spec sheet. And gaming is getting hit hardest of all because consoles are usually sold at a loss. The company eats the cost up front and makes it back on games. That model only works if components actually get cheaper over time. Well now they're not. Like watch what happened just today. Microsoft raised Xbox prices again. The third price increase within the last year. The Series X is now $800 and they killed the high storage model entirely because they couldn't make the math work. Their own reason. The storage and memory in the console has gone up 2.5x in price since October. And they expect it to double again next year. And it's not just Xbox. Valve also just shipped the Steam machine and had to design around the shortage in real time using just one stick of RAM instead of two. Which actually made some of their games run slower because they couldn't reliably get the parts. And the reason there won't be a quick fix is due to manufacturing issues. A memory factory takes years to build. The new ones don't come online until 2027, some not until 2028 or later. So is Apple stuck? Well yes. And so is everybody else. You cannot negotiate your way to chips that don't exist. And the man at the center of all this isn't hiding it. NVIDIA's Jensen Huang, whose chips are the reason the memory is gone, told reporters that this shortage is going to persist for several years. So here's what actually happens next. You'll just stop upgrading. Most people just won't buy the next MacBook upgrade. You'll keep the one you currently have. That phone you thought about trading in this year for the next model? You'll keep it and run it for another two or three years. The laptop that's getting a little slow suddenly feels fine for another 18 months. Now you multiply this logic across a few hundred million people, and you get quite this kind of crisis. It's not panic. It's just everyone collectively deciding to wait and not buy more Apple products, tech products. This is already happening. People who are about to upgrade just close the tab. One guy pricing a high-end MacBook watched it jump $2,000 in a week and he said, never mind, can't justify it. Another said his upgrade timeline just went from now to let's get another year or two out of this thing. The upgrade just stopped making sense. And the numbers back it up. Research firms expect the phone market to have its worst year on record, and PCs to drop double digits. So who's eating up all the memory? The four biggest tech companies, Microsoft, Amazon, Google, and Meta, are spending something like $700 billion on AI this year. And a lot of that demand is the AI companies paying each other circularly. NVIDIA invests billions in OpenAI. OpenAI spends it renting computers from Microsoft, and Microsoft invests that back into NVIDIA chips. It's a loop. You see, no one actually has the money. There's not enough earnings to justify any of this just this month. Google, without the earnings, decided to just sell about $85 billion of its own stock, diluting shareholders to fund its own AI build-out. That is the biggest stock sale in American history. They don't actually have the earnings to cover this. They're just spending. And Meta is reportedly doing the same as well. It is going to be a race to the bottom to fund the AI CapEx build-out. And meanwhile, the money actually coming back from AI is tiny next to what's going on. Hundreds of billions of dollars of CapEx going out the door, and only a small fraction, about 10% or so, is coming back in as real revenue. So maybe we're overbuilding and building something world-changing too at the same time. The internet crash in the 2000s, for example, wiped out a fortune of companies, but it still gave us Amazon and Google. One thing everyone agrees on, though, is a lot of this money is going to burn. So here's the obvious question. Why doesn't somebody just slow down and let supply catch up? Because no one can afford to lose the AI race. It is a game of chicken. And every one of these companies believe that if AI is the future, and if they fall behind, then they're dead. So each of them is forced to continue spending. They are wired together. But the thing is, if even one big player cuts its chip orders, stops spending, then this can cascade. NVIDIA sales could drop. The data center builders freeze. The memory makers are suddenly drowning in supply. And the circular money runs backwards. Well, that's not a stable market. That is a row of dominoes. And this is the trap with bubbles. And a lot of people are saying the tech run-up may be done. We've had years of nice gains in the stock market. So I'm not saying that tech crashes next month. I'm saying the structure is fragile though. When Google has to sell a piece of itself just to keep spending. When Apple has to raise prices. When Microsoft has to raise prices. Well, that's how you know the bill for AI is finally here. And someone has to pay it. So three things quickly. Number one, prices are not coming down. This is not a temporary shortage. It is chronic. And if you genuinely need a new machine, a laptop for work, or a phone that's actually dying, it may be wise to buy it sooner rather than later. Because the sale you're waiting for may not be coming. And if you don't need it, then you already know what most people are going to do. Because you're probably going to do it too. Just keep what you've got. Run it into the ground. And if you own tech stocks, you know, we've had a nice run. Maybe take a look at that. Diversify. Take some profits. People always ask what I'm actually bullish on. And here's one contrarian take. Cash. USD. When I think about it, what is the one asset that nobody has enough of? That every company is scrambling to get more of so that they can spend on AI CapEx? Well, that's cash. Every company is cash strapped. Everyone's trying to raise money. And the markets are looking a little frothy. So that'll do for this video. Let me know your thoughts on Ramageddon in the comments below. And I'll see you in the next one. Assuming we can all still afford the computers to watch it on.