Memory maker Micron (MU) reported blowout first-quarter earnings on Wednesday, beating both revenue and profit estimates and providing a better-than-expected second-quarter outlook as data center builders look to grab as many of the company’s memory chips as possible.
Micron Technology makes memory (called DRAM) for data centers. As the construction of data centers in the United States booms, the price of this kind of memory is getting higher and higher.
There’s just one problem: DRAM is also used in devices like smartphones and laptops.
Consumer PCs and other systems use a type of DRAM called double data rate memory (DDR), while data centers use a type of DRAM called high-bandwidth memory (HBM).
Due to the higher profit margins of data center components, DRAM vendors are currently more focused on building HBM rather than DRAM. This leaves the wider market hungry.
It’s not just PC buyers who are feeling the sting. Everything from cars to medical devices could be affected by a shortage of memory chips.
To make matters worse, before releasing its financial report, Micron announced that it would exit the consumer memory business and focus on providing memory for artificial intelligence data centers.
“It’s not going to be good for consumers because it’s going to drive up prices very quickly,” Ryan Reith, group vice president of Worldwide Device Trackers at IDC, told Yahoo Finance.
While most of us tend to think of GPUs powering AI data centers, they are just part of a cluster of servers running applications like OpenAI (OPAI.PVT) ChatGPT and Google (GOOG, GOOGL) Gemini. In addition to CPU and storage, they also require large memory pools.
question? There are only a few major memory manufacturers in the world. These include well-known companies such as Samsung, SK Hynix and Micron (MU). Huge demand for data center equipment is driving up prices across the industry.
According to Reuters, Samsung has increased the price of some memory by as much as 60%. Enthusiast site PCPartPicker tracks the prices of various memory modules, showing that the cost of some has climbed from $100 to nearly $450.
“I think the general consensus is that over the last month… this has gotten more attention, but not in a positive way,” Reese said, adding that the price impact may ultimately be passed on to consumers, especially on lower-cost laptops.
That’s because companies that make entry-level and mid-range systems have less wiggle room on pricing before completely draining profits.
