What’s been good for Micron Technology and its fellow memory suppliers isn’t necessarily great for the rest of the technology world.
As chipmakers like Nvidia seek out more high-bandwidth memory for their AI hardware, that’s driven up memory prices at companies like Micron, which are scrambling to meet demand. And that in turn means ripple effects across the technology ecosystem, including potentially higher costs for consumer-electronics manufacturers that rely on memory chips to store and access data.
For Apple, memory is what everyone is watching in the near term, according to Seaport Research analyst Jay Goldberg. Memory costs have the potential to impact gross margins as well as the decisions Apple makes in terms of how to price its own products.
The company has long-term memory contracts, which can help insulate it from volatile pricing dynamics and reflect a push to lock prices in when cycles are favorable. But it’s not exactly clear how long those contracts last.
Conventional wisdom would suggest that Apple is going to get pinched on memory costs at some point down the line, Goldberg told MarketWatch. But maybe not, he noted, if the company is able to get more favorable pricing than its competitors.
In short, memory is “possibly good, possibly bad,” he said, but nonetheless a key factor investors need to monitor heading into the new year.
For its part, Apple has shrugged off memory concerns. “On the commodity side, I would say we’re seeing a slight tailwind on memory,” CFO Kevan Parekh said on the company’s last earnings call in late October. He noted that Apple exceeded the high bound of its guidance as it delivered a 47.2% gross margin last quarter. The midpoint of the current guidance range is 47.5%, which implies expansion potential ahead.
Jefferies analyst Edison Lee wrote earlier this month that Apple was “highly resilient to memory cost hikes,” and it “could benefit from pulled-in consumer demand” in the coming quarters, as shoppers seem worried that prices could rise with the next iPhone model despite a dearth of meaningful feature improvements.
Apple likely has already locked in much of its memory supply for the current product cycle, according to Bernstein analysts, who said the company “only has 10% of its iPhone volume…facing these increased prices.” That means the memory issue could be just a 0.3% drag on earnings per share, versus a 4% drag if the company didn’t have long-term agreements, the analysts estimated.
“For the next iPhone 18 cycle, memory prices will be renegotiated and we expect other costs and prices will be managed to have negligible impact on longer-term earnings,” the analysts wrote in a November report.
AI is the other big issue on investors’ minds heading into 2026. Investors “really want to know what their AI strategy is,” Goldberg noted.
The company has made a series of missteps with AI, teasing features before they were ready for primetime and rolling out new functions more slowly than peers. Apple has brought in a Google veteran to lead various AI initiatives, suggesting it’s looking for a shakeup. But Goldberg wonders if an outsider will be able to forge the necessary relationships in a company known for its “really strong internal culture.”
Unlike other Big Tech companies, Apple has been disciplined with AI spending. Apple is known for “steering away from capital-intensive kinds of product development within artificial intelligence and essentially saying, may the best product win and we’re going to collect the toll on the other side of it if you want to access our iOS users,’” said Matt Stucky, the chief portfolio manager for equities at Northwestern Mutual Wealth Management.
He doubts the company will spend heavily to build its own large language model, as it will more likely opt for a strategic partner, namely Google.
“That’s probably maximizing their market-dominant position from a capital-efficiency perspective,” Stucky said. But in that case, investors may be left wondering what the next leg of growth is.
The shares trade at about 30 times forward earnings he noted, a “pretty high level” for a company with Apple’s growth profile. The company increased revenue by just over 6% for the fiscal year that ended in September.
Apple investors will be looking for a stronger showing next year, with shares up only 9.3% in 2025, with just two trading days left in the year. That’s the second-worst performance among the “Magnificent Seven” players and significantly below the S&P 500 index’s 17.4% gain in the year to date.
