The Cost of the Storage Feast: Behind Samsung's Doubling Profits, Apple's and HP's "Profit Defense War" Has Just Begun

Global technology hardware giants are facing a severe "profit defense battle" as prices for storage components soar, leading to significant differentiation within the industry. While memory chip manufacturers are experiencing explosive profit growth, equipment manufacturers at the downstream of the supply chain are forced to make tough choices between sacrificing profit margins and raising prices to curb demand.

According to Bloomberg, this imbalance is particularly evident in the latest financial data. Samsung's performance last week showed that the average selling price of dynamic random-access memory (DRAM) surged more than 30% month-on-month, while prices for non-volatile flash memory (NAND) chips also rose by about 20%. This price surge has propelled Samsung's profits to more than double, and this upward pricing trend is expected to continue throughout 2026.

This price increase driven by AI demand has been described by technology research firm IDC as an "unprecedented shortage of storage chips," and is seen as a "crisis" for equipment manufacturers. The market's reaction has been quite severe: Apple’s stock price, after experiencing its worst year since 2022, fell another 4.4% at the start of 2026, becoming one of the weakest stocks in the Nasdaq 100 index; HP's stock price has dropped to its lowest level since November 2020.

Analysts point out that the current shortage is not a traditional cyclical fluctuation, but a strategic reallocation of global silicon wafer capacity. This means that the cost pressures faced by hardware manufacturers are unlikely to ease in the short term, and in this feast of the storage industry, they have to foot the ever-increasing bills.

Divergent Stock Performance

Over the past year, the surge in storage component prices has created a polarized landscape in the U.S. stock market. On one hand, storage stocks such as SanDisk, Micron Technology, and Western Digital have emerged as big winners in the market. Entering 2026, SanDisk leads the S&P 500 index with a gain of over 60%, while Western Digital and Micron also rank high on the list of gainers.

On the other hand, hardware giants are mired in difficulties. Apple's stock price rose only 8.6% in 2025 and continued to decline at the start of the new year. After losing nearly a third of its market value in 2025, HP's stock fell another 6.8% at the beginning of 2026. Dell's stock has dropped 28% since hitting an all-time high last October.

Rob Thummel, a senior portfolio manager at Tortoise Capital, pointed out that these hardware companies are in a "difficult situation." In an interview with Bloomberg, he stated:

As long as storage prices remain high—given the demand brought by AI, we expect this situation to persist for some time—the market may continue to punish these stocks.

Profits Under Direct Erosion

For consumer-facing hardware products, storage components are not only key parts but also a significant portion of costs. IDC analyst Francisco Jeronimo pointed out that storage typically accounts for 10% to 20% of the material costs of hardware such as smartphones. As costs surge, companies' profit expectations are being rapidly revised downward. HP has been particularly impacted. Company executives estimated during a conference call that rising storage costs will lead to a reduction of 30 cents in its adjusted earnings per share (EPS) for 2026. Data compiled by Bloomberg shows that market expectations for HP's net EPS in 2026 have been lowered by 7.1% over the past month.

Goldman Sachs analyst Katherine Murphy wrote in a report to clients that HP is the company most affected by pressures on PC profit margins and demand within her coverage. She expects that price increases implemented to offset rising input costs such as storage chips will have a "substantial impact" on low-end consumer PC purchases in the second half of 2026.

Even Apple, which has strong pricing power, is not immune. Paul Meeks, head of technology research at Freedom Capital Markets, stated:

"In the next two years, the magnitude of the increase in storage component costs could even impact companies as large as Apple."

Hedgeye Risk Management also indicated last week that its confidence in Apple is waning as storage issues become increasingly severe.

Irreversible Supply Shortages

The nature of this supply shortage has caused particular concern in the market. IDC believes this is different from the typical "boom-bust" cycle seen in the past. Francisco Jeronimo wrote in a report:

"This time is different; it is not just a cyclical shortage driven by supply-demand mismatches, but rather a potential, permanent strategic reallocation of global silicon wafer capacity."

This structural change means that price pressures are unlikely to dissipate quickly. Paul Meeks pointed out that while storage prices are cyclical, the current supply is extremely scarce and is not expected to reverse in the short term.

This pressure has even extended to chip manufacturers that provide semiconductors for smartphones. Due to the risks associated with rising storage prices, Mizuho Securities and Bank of America recently downgraded Qualcomm and Arm's ratings, respectively. In this sector, Rob Thummel is only optimistic about Dell, as its server business growth can partially offset the headwinds from rising storage costs