Apple Chief Govt Officer Tim Cook dinner dropped a bombshell on traders through the firm’s newest quarterly earnings name, noting a “100-year flood” in reminiscence chip pricing, suggesting a serious occasion had occurred that upended all the corporate’s typical evaluation. This could possibly be a serious downside for Apple, because it has to boost costs simply to keep up margins, probably stretching already-indebted shoppers and inflicting gross sales points.
Nonetheless, simply because Apple could also be struggling on account of rising reminiscence chip costs doesn’t suggest that traders will miss out on it. As an alternative, I would recommend reminiscence chip firms to spend money on, as they’re those making a killing from rising costs.
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Two that I feel are well-positioned to money in are Sandisk (NASDAQ: SNDK) and Micron (NASDAQ: MU). Every firm has been on an absolute tear this yr on account of rising reminiscence chip costs, and the pattern may proceed into 2027 if costs stay excessive.
Apple CEO Tim Cook dinner. Picture supply: Apple.
Sandisk and Micron are making a fortune from rising reminiscence costs
Sandisk and Micron every fabricate reminiscence chips. Nonetheless, Sandisk focuses solely on NAND reminiscence, whereas Micron produces each NAND and DRAM. Each kinds of reminiscence are utilized in Apple merchandise and in knowledge facilities. DRAM reminiscence is far sooner however has a decrease storage capability. NAND reminiscence is usually used for long-term knowledge storage, though it is not as quick as DRAM.
Every chip kind is important in all kinds of computing units. Nonetheless, with knowledge facilities sucking up all the reminiscence chip manufacturing capability, each digital gadget is being affected by hovering costs.
Apple is not the one firm in a pinch, both. Amazon famous on its convention name that it was elevating its 2026 capital expenditure forecast from $200 billion to $220 billion on account of rising reminiscence chip costs. That seemingly echoes sentiment throughout the board from numerous AI hyperscalers which are coping with the identical downside, but it surely’s not an issue for Sandisk and Micron. Each firms are making a fortune from rising costs and elevated demand.
Sandisk not too long ago reported This autumn of fiscal yr 2026 earnings (ended July 3) and delivered a jaw-dropping 372% year-over-year income progress charge. Much more spectacular was a 51% quarter-over-quarter progress charge, displaying that rising costs are nonetheless ongoing.
Sandisk famous that two-thirds of its income progress got here from rising costs and solely one-third from elevated volumes. That is a serious downside for firms like Apple and will persist sooner or later, as Sandisk expects income to proceed rising at a fast charge subsequent quarter.
Throughout Micron’s final earnings report, it famous that the tight reminiscence chip market situations will final past 2027. So, the reminiscence chip market would not have a transparent restoration in sight, and this downside will solely worsen for Apple and different firms shopping for enormous quantities of reminiscence chips.
As a result of the market is apprehensive concerning the sustainability of chip demand, which usually endures a boom-and-bust cycle, the shares are comparatively low cost. Sandisk is priced at 6.3 instances FY 2027 earnings — a really low cost price ticket contemplating its fast progress.
With every inventory priced this low, I would not be stunned to see them rally by way of the top of this yr and into 2027. A cyclical downturn could possibly be coming, but it surely will not be till 2028 on the earliest. That leaves quite a lot of time for traders to generate income on these two, and I feel now is the perfect time to buy.
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Keithen Drury has positions in Amazon. The Motley Idiot has positions in and recommends Amazon, Apple, and Micron Expertise. The Motley Idiot has a disclosure policy.
