AI boom drives global chip shortage, causing consumer gadget prices to soar

After decades of falling prices, consumer electronics are becoming more expensive as the artificial intelligence boom fuels a global shortage of essential memory and storage chips. This shift is impacting everything from computers to video game consoles, reversing a long-standing trend of decreasing gadget costs.

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The vast majority of the chips are going to the AI buildout and the data center revolution we're seeing. That's [fewer] chips for these regular consumer devices. That just further drives up prices.

Analysts explain that the vast majority of available chips are being directed towards AI development and the expansion of data centers. This intense demand from tech giants like Alphabet, Amazon, and Meta leaves fewer chips for regular consumer devices, inevitably driving up their prices. Companies are now facing increased costs for electronic device components.

This trend is already visible, with major tech firms like Apple and Microsoft announcing price increases on core products, including iPads, certain MacBook models, and Xbox consoles. Market researchers suggest that even iPhone prices could rise significantly, potentially by as much as $200 for Pro and Pro Max models, as manufacturers struggle to offset escalating production expenses.

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Basically, we ended up with a situation where those companies, the hyperscalers, started buying the entire capacity from those suppliers at premium prices.

The surge in gadget prices is a notable departure from the norm since the 1980s, when personal electronics costs generally declined. Recent inflation data show significant price jumps for computer software and accessories, while personal computers and related hardware have also seen increases. Chip manufacturers, historically focused on standard memory chips for consumer devices, are now prioritizing the more profitable high-bandwidth memory (HBM) chips essential for AI data centers, effectively dedicating their entire capacity to this booming sector.

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What is the point of selling and making memory for smartphones or PCs or any other device when we have this huge opportunity for many years to come?