Apple Inc. shares edged higher in early trading on Thursday after Chief Executive Officer Tim Cook indicated that the company would be forced to raise prices on its products due to escalating costs for memory and storage chips. The stock climbed 0.8% to $298.25, as investors weighed the company's pricing power against potential margin pressures stemming from the global semiconductor shortage.
Speaking to the Wall Street Journal, Cook described the price increases as “unavoidable,” attributing the higher costs to surging demand for dynamic random-access memory (DRAM) and storage chips, which are being consumed in large quantities by artificial intelligence data centers. This has created a supply squeeze that is now affecting consumer electronics manufacturers, including Apple, which relies on these components for its iPhones, Macs, and iPads.
The announcement comes at a time when the technology sector is grappling with a broader chip crunch, with AI-driven demand exacerbating an already tight supply chain. The market reaction was not limited to Apple; other chip stocks also moved sharply higher. Intel Corporation jumped 7.8% on reports that Apple might collaborate with the chipmaker for U.S.-based design and manufacturing, while Micron Technology gained 6.6% alongside other memory chip producers.
Investors are closely watching whether Apple can pass on these higher costs to consumers without dampening demand for its flagship products. The company’s ability to raise prices—its pricing power—is seen as a key factor in protecting its gross margins, which stood at 49.27% in the most recent quarter. However, Apple has already flagged that memory expenses would weigh more heavily after the June quarter, with the midpoint of its gross margin guidance coming in lower than the previous quarter.
Broader market indices also benefited from the tech rally. The Nasdaq Composite rose 1.49% at the open, while the S&P 500 gained 0.91%, according to Reuters. The positive sentiment was partly fueled by reports that former President Donald Trump had announced a potential partnership between Apple and Intel to design and manufacture chips in the United States, though neither company responded to requests for comment.
Apple’s AI ambitions were also in focus. At its recent developers conference, the company revealed plans to use Alphabet’s Google Gemini for certain Siri models and to run larger AI models on cloud infrastructure built with Nvidia chips. Analysts offered mixed views on the strategy. Bob O’Donnell of TECHnalysis Research called it “AI for the masses,” while Craig Moffett of MoffettNathanson described the upgrades as not “earth-shaking” but potentially making Siri a more capable chatbot.
Despite the challenges, Apple’s financial performance remains robust. The company posted March-quarter revenue of $111.2 billion, a 17% increase year over year, with services revenue hitting a new record. Apple also announced up to $100 billion in additional share buybacks, signaling confidence in its long-term prospects. However, the risk of raising prices could slow upgrade cycles, particularly if consumers do not perceive enough new AI features to justify higher costs compared to competing products.
U.S. markets are set to close early on Friday, June 19, in observance of Juneteenth, which could lead to some positioning adjustments in Thursday’s session. As traders digest Cook’s comments, the market’s verdict will depend on whether Apple can maintain its margin trajectory without alienating its customer base. If sales falter in upcoming product launches, the current optimism could quickly reverse.
