LIVE MARKETS-Memory Price Surge Might Squeeze Profits at Consumer Electronics Makers Dell, HP

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

MEMORY PRICE SURGE MIGHT SQUEEZE PROFITS AT CONSUMER ELECTRONICS MAKERS DELL, HP

A global memory chip price surge brought on by rising demand from datacenters could push up costs and pressure profits at consumer electronics makers such as Dell, HP and Acer, Morgan Stanley analysts warned in a note on Monday.

Prices for dynamic random access memory and NAND - two commonly used types of memory chips - have jumped between 50% and 300% in recent months, the brokerage estimated, citing demand from Big Tech's push to build out AI infrastructure as well as years of underinvestment in NAND manufacturing.

MS cautioned that the shortage is so bad that memory fulfillment rates could fall as low as 40% over the coming two quarters.

The brokerage noted that Dell DELL.N and HP HPQ.N face the greatest pressure given high DRAM exposure and thinner margins, while Pure Storage PSTG.N and Apple AAPL.O are better insulated by cost control and synthetic price increases. In Asia, Acer 2353.TW and Asustek 2357.TW look vulnerable, while Lenovo 0992.HK and Giga-Byte benefit from scale and sourcing strategies given their stronger bargaining power on procuring components.

Memory accounts for 10% to 70% of hardware bills of materials, leaving the original equipment manufacturers (OEMs) and original design manufacturers (ODMs) highly exposed to these price changes.

Morgan Stanley estimates every 10% rise in memory costs could hit gross margins by up to 150 basis points, translating to a median 15% EPS hit if not offset. Even with mitigation, earnings could fall 11% below their consensus in 2026.

This surge in prices is reminiscent of the 2016-2018 cycle but carries greater risk, as DRAM spot prices have surged 260% in just two months, triple the pace of the last upcycle, while enterprise hardware budgets are expected to rise only 1.6% in 2026, the slowest growth in several years, as corporate IT chiefs prepare to buy fewer products at higher prices or defer upgrades.

(Kritika Lamba)

EARLIER ON LIVE MARKETS:

CALM BEFORE THE DELAYED DATA STORM: EMPIRE STATE, CONSTRUCTION SPENDING CLICK HERE

AI MANIA POWERS WALL STREET AS JPMORGAN WARNS OF FRAGILE FOUNDATIONS CLICK HERE

EARLY SIGNALS OR JUST SMOKE? SOME SAY FUNDAMENTALS STILL HOLD CLICK HERE

BEYOND THE LABEL: ARE EUROPE'S LUXURY GIANTS OUT OF FASHION? CLICK HERE

MAPPING MARKETS: WHAT COMES NEXT AFTER THE SELLOFF? CLICK HERE

FLEXIBILITY OR NECESSITY? THE GIG ECONOMY'S GROWING ROLE IN TOUGH TIMES CLICK HERE

S&P 500 INDEX AND THE RESILIENCE OF ITS 50-DMA CLICK HERE

U.S. CORPORATE SENTIMENT KEEPS GETTING BETTER CLICK HERE

EUROPE'S EARNINGS POISED FOR A REBOUND – JPM CLICK HERE

BUDGET FLIP-FLOPPING IS MAKING UK MARKETS LESS ATTRACTIVE CLICK HERE

STOCKS STRUGGLE BEFORE LONG-AWAITED DATA DELUGE CLICK HERE

EUROPE BEFORE THE BELL: CAUTIOUS START, US DATA LOOMS LARGE CLICK HERE

NVIDIA EARNINGS LIKELY TO OVERSHADOW DELAYED US DATA CLICK HERE