Key insights
- Morgan Stanley warns that soaring AI-driven memory chip prices are causing 'chipflation,' impacting wider economic factors beyond data centers. This trend is forcing device makers to choose between raising prices or accepting lower margins. The brokerage highlights that this crunch is becoming a macroeconomic concern, affecting producer prices, corporate margins, cloud costs, and potentially delaying new technology rollouts, which could indirectly pressure consumer spending and overall economic growth.
June 3 (Reuters) - Soaring memory chip prices driven by massive AI demand risk stoking "chipflation," Morgan Stanley analysts cautioned, as makers of devices from smartphones to PCs are forced to choose between raising prices and settling for thinner margins.
The brokerage said on Tuesday that memory chip prices have spiked six-fold in the past year, as manufacturers have struggled to keep up with Big Tech's AI infrastructure spending spree and prioritized higher-margin data center chips over those used in everyday devices.
"What began as an AI infrastructure bottleneck is now spreading into hardware margins, device affordability, cloud costs, inflation and policy," Morgan Stanley said in a 66-page note, adding the crunch has "become a macroeconomic concern."
While the direct impact on consumer inflation may be limited, the pressure is showing up across producer prices, corporate margins, cloud costs, capital spending and delays in rolling out new technology, the brokerage wrote.