AXIOS (Emily Peck) - Why "chipflation" is here to stay
Data: U.S. Bureau of Labor Statistics via FRED ; Chart: Emily Peck/Axios Memory chip prices are skyrocketing, thanks to AI demand, and there's no end in sight. Why it matters: "Chipflation" is pushing up the prices for electronic goods like smartphones and laptops, as well as the costs for cloud storage and hardware — it also helps explain the eye-popping ascents in semiconductor stock prices. - While the overall effect on inflation may not be huge — other kinds of products get more weight in the government's measure of consumer prices — the scale of this boom is unprecedented. By the numbers: The Producer Price Index for electronic components and accessories, which measures what companies pay for semiconductor chips and other…
What term did Morgan Stanley analysts use to describe the current corporate mindset regarding tech spending despite rising costs?
Analysts coined the term "FOMP," which stands for "Fear of Missing Procurement," as a nerdier corollary to FOMO. This reflects why companies remain eager to keep spending despite the rising costs associated with chipflation.
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How has the historical price trend of DRAM (Dynamic Random Access Memory) changed in the context of the AI economy?
From 1957 to 2020, the price of a gigabyte of DRAM fell by approximately a factor of 10 every five years. However, according to a Morgan Stanley note, this downward trend no longer applies in the AI economy, and memory prices have risen more than sixfold over the past year.
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What is Apple currently doing to manage skyrocketing memory chip costs according to a Wall Street Journal report?
Apple is testing memory chips from the Chinese memory chip maker CXMT. However, the company would require White House approval to bypass rules that typically prohibit such a tie-up.
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How are AI hyperscalers like Meta, Microsoft, and Alphabet affecting the supply of memory chips?
AI hyperscalers are locking up the memory supply years in advance through long-term agreements, which leaves traditional phone and PC makers to compete for a shrinking pool of supply.
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How much did the Producer Price Index (PPI) for electronic components and accessories increase in June compared to the same time last year?
The PPI for these components rose 27.6% in June from the same time last year, marking the largest increase in records dating back to 1966. This surge eclipses the price increases seen during the pandemic supply crunch and the dawn of the PC era in 1980.
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What is "chipflation" and what specific products are seeing price increases due to this phenomenon?
Chipflation refers to the skyrocketing prices of memory chips driven by AI demand. This is pushing up the costs of electronic goods such as smartphones and laptops, as well as the costs for hardware and cloud storage.
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