Apple and Microsoft Forced to Raise Prices, Cook Admits 'Unprecedented in 40 Years' – Is AI Driving a New Wave of Inflation?
- Core Thesis: Apple and Microsoft have announced price increases for multiple hardware products, including Mac, iPad, and Xbox, due to soaring costs of storage and memory components driven by AI data center construction. This indicates that cost pressures from the AI arms race are being passed on to ordinary users through consumer electronics, potentially triggering a new wave of structural inflation.
- Key Elements:
- The starting price of the Apple MacBook Air has risen by approximately 18% to $1,299, the 16-inch MacBook Pro saw a single price increase of $500, and the iPad Air has surged by 25%.
- The standard edition of the Microsoft Xbox Series X will retail for $800, a cumulative increase of $300 from its launch price in 2020, with component costs having more than doubled (over 2.5 times).
- Capital expenditure by the top five hyperscale cloud providers is projected to reach $741 billion in 2025, a nearly 75% year-over-year increase, with funds primarily directed toward AI data center construction.
- Memory and storage prices have quadrupled over the past three quarters, with Micron's latest quarterly gross margin reaching a record high of 84.9%.
- In May, consumer-level computer software and accessory prices in the U.S. rose by approximately 15% year-over-year, while wholesale electronic component prices surged 27% year-over-year.
- Goldman Sachs estimates that data centers will account for nearly half of new U.S. electricity demand by 2030, with annual consumer electricity price increases reaching around 6%.
- 81% of surveyed economists believe that AI infrastructure buildout will push inflation higher over the next year, though some argue that AI could act as a deflationary force in the long run.
Original Author: Long Yue
Original Source: Wall Street CN
Apple and Microsoft announced price increases on the same day. This might not be a coincidence. As the bill for the AI arms race begins to be passed on to ordinary consumers, a new wave of inflation driven by data centers is quietly taking shape.
Apple announced on Thursday global price increases for Macs, iPads, and multiple hardware products, with increases reaching up to $300. Microsoft announced on the same day that its Xbox game console will see its third price hike starting August 1st, with some models increasing by up to $150. The reasons given by both companies are highly consistent: a sharp surge in the prices of memory and storage components.
Apple CEO Tim Cook had previously warned the media. He described the supply crisis as a "once-in-a-century flood" and stated, "In over 40 years of experience in the industry, I have never seen anything like this." Apple directly named the reason in its statement: "The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. The company has never seen a single component's price rise so much, so quickly."
Following the announcement, Apple's stock closed down 6.15% on Thursday, while Microsoft fell 3.45%.
Price Hike Details: Substantial and Broad Coverage
Apple's latest price adjustments cover multiple product lines, including MacBook, iPad, HomePod, Apple TV, and Vision Pro.
Specifically: The starting price of the MacBook Air has risen from $1,099 to $1,299, an increase of about 18%; the 16-inch MacBook Pro has jumped from $2,499 to $2,999, a single increase of $500; the iPad Air has gone from $599 to $749, a 25% increase; the entry-level iPad has risen from $349 to $449; and the Apple TV has increased from $129 to $199, an increase of over 54%.
The iPhone was not included in this round of price hikes. However, Apple's wording was telling — the statement mentioned it had "reached a point where it needs to start raising prices on multiple products," leaving room for further increases.
On Microsoft's side, the standard edition of the Xbox Series X will be priced at $800, a cumulative increase of $300 from its original launch price in 2020. Microsoft stated in an official blog: "We hoped not to raise prices again, having negotiated various options with suppliers over the past few months, but component prices have risen by over 2.5 times and are expected to double again by the fall of 2027."
Xbox CEO Asha Sharma disclosed in an internal email that the company expects to pay five times more for storage and memory components by the 2027 holiday season compared to 2024.
Root Cause: AI Computing Power Arms Race Seizes Storage Capacity
The root of this price surge lies in the large-scale seizure of storage resources by AI infrastructure construction.
FactSet data shows that the five major hyperscale cloud providers — Alphabet, Amazon, Meta, Microsoft, and Oracle — are expected to spend approximately $741 billion on capital expenditures this year, an increase of nearly 75% year-over-year.
Where is this money going? Columbia University economist Stijn Van Nieuwerburgh points out that the construction of AI data centers is highly physical — requiring specific cooling equipment, power and fiber optic cables, backup generators, and large amounts of High Bandwidth Memory (HBM). He estimates that the total cost of AI infrastructure construction over the next six years could reach $8 trillion.
Suppliers are responding by shifting production capacity towards AI servers. According to Counterpoint Research data, memory and storage prices have quadrupled over the past three quarters. This trend is directly reflected in chip manufacturers' financials: Micron's latest quarterly gross margin surged from 39% a year ago to 84.9%, surpassing Nvidia and Meta, reaching an all-time high.
The result is: AI companies have snatched up storage capacity originally intended for consumer electronics. Manufacturers like Apple and Microsoft can only compete for the remaining supply at higher prices, ultimately passing the costs on to consumers.
Inflationary Pressure is Spreading
This cost pressure is already leaving its mark on macroeconomic data.
According to the U.S. Department of Labor, prices for consumer-grade computer software and accessories rose about 15% year-over-year in May. Wholesale prices for electronic components and accessories soared 27% year-over-year.
Electricity prices are also under pressure. Goldman Sachs estimates that data centers will account for nearly half of the new electricity demand in the U.S. by 2030, and predicts that consumer electricity prices will rise at an annual rate of about 6% in 2026 and 2027.
The wave of price increases is also spreading in the gaming hardware industry. Sony's PlayStation has been raised several times, the suggested retail price for Nintendo's Switch 2 will rise to $500 in September, and Valve's Steam Machine console has also surpassed the $1,000 mark.
Counterpoint Research Research Director Tarun Pathak estimates that higher component costs could add about $200 to the cost of each iPhone for Apple, and expects a price increase of $150 to $200 across Apple's entire product line.
Debate: Is AI Inflation Temporary or Persistent?
On Thursday, the Wall Street Journal published an article stating that the AI infrastructure boom is creating a third wave of inflation in the United States.
The article quoted Gregory Daco, Chief Economist at EY-Parthenon and President of the National Association for Business Economics (NABE), as saying: "In the first phase of any major technological revolution, limited resources tend to come under pressure, which typically pushes up prices."
Unlike one-off economic shocks like tariffs or oil prices, the impact of AI on demand could last for years. A NABE survey on Monday showed that 81% of respondents believe AI infrastructure construction will push up inflation over the next year.
However, there are voices pointing to the other side. Current Federal Reserve Chairman Kevin Warsh wrote in the Wall Street Journal last November, stating that "AI will be a significant deflationary force, boosting productivity and enhancing U.S. competitiveness," and argued that "a one-percentage-point annual increase in productivity would double living standards within a generation."
UBS economists, however, believe that there is at least a several-year time lag between the current construction boom and AI actually driving prices down.
