Memory stocks just lived through a brutal month. Sandisk Corp. (NASDAQ:SNDK) lost more than a third of its value, and Micron Technology Inc. (NASDAQ:MU) shed about a fifth.
On Tuesday, their biggest customer handed them a reason to bounce.
Apple Inc. (NASDAQ:AAPL) said memory prices will keep rising past the holidays, even as the squeeze drags on its own profit margins.
By 10:12 a.m. ET, Apple shares were down 1.7% at $332.64, erasing about $83 billion in market value.
Meanwhile, memory stocks rallied across the board. Sandisk jumped 4.9%, Seagate Technology Holdings PLC (NASDAQ:STX) rose 3.9% and Western Digital Corp. (NASDAQ:WDC) gained 3.8%.
Micron climbed 3.1%, while SK Hynix (NASDAQ:SKHY) added 2.4%.
So why does Apple’s margin problem look like good news for memory stocks?
Apple Says Memory Prices Will Keep Rising
Apple reported fiscal fourth-quarter revenue of $114.5 billion, up 12% from a year earlier, and earnings of $2.10 per share. iPhone sales climbed 17%.
The guidance, however, told a different story.
Chief Financial Officer Kevan Parekh said gross margin would land between 45% and 46% in the December quarter, below the 46.3% analysts expected. He attributed the decline mainly to higher memory costs.
At the midpoint, it would be Apple’s lowest gross margin since the fiscal fourth quarter of 2023.
CEO John Ternus called the cost pressure unusual.
“What we’re seeing with memory pricing right now is unprecedented,” Ternus said on Monday’s earnings call, his first in the role.
“Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase,” he said.
Why Memory Makers Hold the Pricing Power
AI server builders are absorbing most of the world’s memory supply and paying premiums for it. As a result, device makers are competing for what is left.
Chief Operating Officer Sabih Khan said Apple expects supply constraints on Mac and iPad in the December quarter, primarily because of memory.
In addition, Apple is locking in supply at higher prices. Khan said purchase obligations rose by $33 billion from the June quarter to the September quarter.
The balance sheet shows the same pattern. Apple held $14.5 billion of inventory at the end of September, about 2.5 times the $5.7 billion it held a year earlier.
In other words, the largest buyer in consumer electronics is building stockpiles and still expects to pay more.
Bank of America Sees the Margin Hit Lasting Several Quarters
Bank of America Securities analyst Wamsi Mohan reiterated a Buy rating and a $370 price target on Apple in a note Tuesday.
According to Mohan, memory costs cut about 1 percentage point from gross margin in the September quarter. Tariff refunds of the same size masked the hit.
Mohan said cheaper non-memory components, higher product prices and lower-cost inventory should soften the blow. Even so, he models gross margin below 45.5% for the rest of fiscal 2027.
Still, Mohan called Apple an “eventual winner on AI at the edge.”
Memory Stocks Rebound From a Brutal Month
Last week’s chip rout had dragged the group sharply lower. Even after Tuesday’s gains, SanDisk and Western Digital trade more than 50% below their 52-week highs.
The Roundhill Memory ETF (BATS:DRAM) rose 3.3%, and the VanEck Semiconductor ETF (NASDAQ:SMH) gained 2.1%.
| Company | Price | Today | 1 month | From 52-week high |
|---|---|---|---|---|
| Sandisk (NASDAQ:SNDK) | $1,127.83 | +4.9% | -36.4% | -52.1% |
| Seagate Technology (NASDAQ:STX) | $616.63 | +3.9% | -25.0% | -46.1% |
| Western Digital (NASDAQ:WDC) | $351.63 | +3.8% | -16.9% | -56.0% |
| Micron Technology (NASDAQ:MU) | $859.65 | +3.1% | -22.4% | -31.5% |
| SK Hynix (NASDAQ:SKHY) | $151.31 | +2.4% | -22.1% | -24.3% |
| Apple (NASDAQ:AAPL) | $332.64 | -1.7% | -0.2% | -5.4% |
Wall Street Is Split on Apple
According to Benzinga Analyst Ratings, Apple carries a consensus Buy rating from 29 analysts, with an average price target of $337, about 1% above current levels. On Tuesday, Argus Research raised its target to $400, while TD Cowen cut its target to $390.
Apple Has Not Said When Memory Prices Will Peak
Apple gave no timeline for when memory costs might ease. Khan also declined to say whether the company had signed long-term supply agreements with memory makers.
Until that changes, each margin forecast from the iPhone maker also works as a read on memory pricing. On Tuesday, memory investors took Apple’s latest forecast as a reason to buy.
Image via Shutterstock
