The New Villian in Tech
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Is AI the new villain in the tech industry?
Is AI the new villain on Main Street? Motley Fool Hidden Gems investing starts now. Welcome to Motley Fool Hit and Gems Investing. I'm Travis Hoyum, joined today by Lou Whiteman and John Quast. And guys, the big story of the week, I think we got to start with Apple. They've raised prices and this is partly an Apple story, Lou. You know, I'm looking for a new computer. I'd love to get one of those Mac studios when they get the new processor. It's supposed to come out in the next few months. But the prices just went up and they went up a significant amount. What in the world is going on?
Yeah, Tim Cook got that job because he was the supply chain guru, and he says he's never seen anything like this in 40 years. The problem is memory costs, and that's all about AI. As Travis said, Apple just announced a huge across the board price hike. Memory is the culprit here.
Why have memory prices increased for Apple products?
We know data centers need Nvidia chips, but they also need a lot of other things, including memory. And they are devouring the supply of the world's new memory. Simple laws of supply and demand are kicking in and it's raising prices for everyone. The reality here is even worse because AI wants a special kind of memory and companies like Micron are racing to make that and not the memory for phones just because it's higher margin. But that's the idea. There is just suddenly a ton of demand and demand from rich pockets and it is affecting prices in a big way.
Yeah, John, this seems like one of those things where AI doesn't necessarily spill over onto Main Street. You know, when I take my kids to sports, AI is not something that generally comes up. But now it's starting to spill into things that we spend money on. When you go to buy the next generation iPhone, if that's the phone you use, or lose Pixel, you... are gonna see higher prices. And that's something where it almost seems like Silicon Valley in general, because it's Silicon Valley driving all of this demand for AI stuff, is gonna make themselves the villain. We're already having enough trouble building data centers. Now people are gonna be mad about smartphone prices.
To quote the Mad Titan Thanos here, dread it, run from it, destiny arrives all the same.
What factors contribute to the rising costs of memory?
Yeah, I mean, last I checked, these companies aren't really asking my opinion on the changes that they're making to their products or their pricing. I'm still protesting the... getting away with the headphone jack. I still want the headphone jack in my phone, and they didn't ask me about taking that away. No, the thing is, I mean, yeah, the prices are going up, and as you mentioned, I mean, Travis, you're talking about the new Mac Studio coming out, but the big thing here is that these prices are going up on existing products. They're not going up on the next generation. You mean the Apple TV? Yeah, this is the stuff that's out now. The prices just got hiked. So that is very interesting. It is possible that consumers are going to be very confused about this, but I don't know what consumers can do about this.
They vote with their dollars, but there's not another candidate on the ballot here. The prices are going up across the board because memory itself is going up, and that's not an Apple problem, and there's really not much that Apple can do about it.
Yeah, Lou, this does seem like it isn't an Apple problem, and I sort of... I think that Tim Cook and team, you're right, maybe they could have seen this ahead of time, but also memory is a commodity, always has been a commodity. Commodities do go through these boom and bust cycles. This reminds me a little bit of rare earths. You might remember that from about a decade ago when rare earth prices went crazy and we thought, you know what, we're not going to be able to make EVs anymore. So this will come back down, but it does seem like this is a PR problem in general for the tech industry. If they're saying, you know what, you got to pay more for phones because we got to build this AI stuff that's going to steal your job anyways.
Yeah, I don't know how easily that translates to Main Street.
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Chapters
8 chapters
1
Is AI the new villain in the tech industry?
0:02–0:55
2
Why have memory prices increased for Apple products?
0:55–2:14
3
What factors contribute to the rising costs of memory?
2:14–4:24
4
How does Silicon Valley impact consumer prices?
4:24–8:37
5
What is the difference between disruptive and sustaining innovation?
8:37–11:21
6
Which stocks are currently on the radar for investors?
11:21–15:07
7
What challenges do companies face in AI spending?
15:07–20:09
8
How are new technologies shaping the future of investing?
20:09–38:00