The AI price shock is here: Apple, Microsoft hike prices
· Axios
People spend a lot of time on their devices. The AI boom means they will also be spending more for them.
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Why it matters: The enormous sums of money going into the AI race are driving up costs for resources and components throughout the economy.
- That's now becoming increasingly apparent to ordinary Americans who might have thought that AI's impact would be primarily on their jobs.
Driving the news: Apple provided the clearest evidence yet Thursday, raising prices by as much as 25% on MacBook and iPad models — and blaming soaring memory chip costs due to AI demand.
- The same memory squeeze is now hitting gaming consoles. Also on Thursday, Microsoft announced price increases of as much as $150 on Xbox consoles — which comes after Sony and Nintendo recently made similar moves.
- Storage and memory costs have more than doubled since last fall, Microsoft said, forcing the price increases because consoles aren't sold with enough margin to absorb those higher costs.
The big picture: For now, the AI boom is moving through the economy less like a sudden wave of layoffs and more like a giant buyer of scarce resources, including electricity, water, storage and data-center space as well as chips.
- It's an "unprecedented challenge" for device makers like Apple, according to Wedbush Securities analyst Dan Ives.
- Consumer gadgets were one of the few places where prices reliably fell over time over the past few decades. The AI infrastructure boom is reversing that norm.
What they're saying: "The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. We have never seen a component price increase this much, this quickly," Apple said in a statement.
- "The entire consumer electronics industry is struggling with the current components crisis, but the effects are particularly hard on consoles," which "are typically not sold at a profit, but instead for less than they cost to make," Microsoft said in a statement.
The intrigue: Prices for computer software and accessories jumped a record 14.5% in May from a year earlier, ending a quarter-century era in which those products almost always got cheaper.
- The category includes storage devices like flash drives that have memory chips.
What to watch: The potential labor market effects of AI may still be huge. Companies are testing how much work can be automated, with any job impact becoming clearer over time.
- Yet pocketbook issues may steal the limelight from worries over jobs.
- Already, AI data centers have fueled a growing political backlash from residents worried about higher utility bills.
The bottom line: Americans have been wondering how the technology would change the economics of their lives. The first place many are feeling it may be their wallets.