Apple's Buying Power Weakens as AI Memory Crunch Drives Up Costs

Apple's dominance as a technology buyer is being challenged by the artificial intelligence boom, as soaring demand for memory chips drives up costs and weakens the company's long-standing leverage over suppliers.



According to The Wall Street Journal, semiconductor manufacturers are increasingly prioritizing high-bandwidth memory for AI servers over the standard DRAM used in smartphones and PCs. The shift has sent prices sharply higher. Market research firm TrendForce estimates that prices for DRAM used in high-end smartphones could rise as much as 83 percent this quarter compared to the previous quarter.


CEO Tim Cook recently acknowledged that Apple has been trying to mitigate rising memory costs without passing them on to customers, but said the current situation has become unsustainable. "Unfortunately, price increases are unavoidable," Cook told the Journal. While Cook did not specify which products could be affected or by how much, analysts are increasingly expecting hardware price increases. BofA Securities analyst Wamsi Mohan said he was already anticipating a $100 increase for upcoming iPhone models and now expects an additional $100 increase for Pro models.

The AI boom has also diminished Apple's standing as one of the industry's most powerful buyers. Nvidia CEO Jensen Huang recently said the company buys tens of billions of dollars worth of DRAM directly from memory manufacturers for its AI systems. Wall Street forecasts suggest the chipmaker could surpass Apple in annual free cash flow this year and generate more than twice as much within two years.

Apple also faces a structural disadvantage compared with cloud providers building AI infrastructure. Companies such as Microsoft and Google can treat memory purchases for data centers as capital expenditures and spread those costs over time. Apple, by contrast, records memory components as cost of goods sold, meaning higher chip prices directly pressure margins unless product prices rise as well. Despite that challenge, analysts still expect Apple's gross margin to exceed 48 percent this fiscal year, which would be its highest level since 1990.

Higher component costs come at a time when Apple is pushing more artificial intelligence features onto devices. Some of Apple's most powerful upcoming AI capabilities are limited to its newest iPhone models, which already carry an average selling price of roughly $1,369, according to the report.


The memory shortage is expected to remain a challenge for incoming CEO John Ternus. Analysts have warned that tight DRAM supply could persist well into 2028.

Apple still holds approximately $62 billion in net cash while returning more than $100 billion annually through buybacks and dividends. The company recently moved away from its long-standing goal of maintaining a net cash neutral position, a move Bernstein analyst Mark Newman said could preserve additional capital for AI investments and potential acquisitions.