Apple and Microsoft Increase Prices Amid AI-Driven Component Inflation

Original author: Long Yue

Source: Wall Street Journal

Apple and Microsoft announced price increases on the same day. This may not be a coincidence—as the bills from the AI arms race begin to be passed on to ordinary consumers, a new wave of inflation driven by data centers is quietly taking shape.

Apple announced on Thursday that it is implementing global price increases for Mac, iPad, and several other hardware products, with increases of up to $300. On the same day, Microsoft announced that the Xbox gaming consoles will undergo their third price increase starting August 1, with some models rising by as much as $150. Both companies cited the same reason: a sharp rise in the cost of storage and memory components.

Apple CEO Cook had previously warned the media, describing the supply crisis as a "once-in-a-century flood" and stating that "in over 40 years of industry experience, he had never seen anything like it." In its statement, Apple directly cited the cause: "The rapid expansion of AI data centers has led to an unprecedented surge in demand for memory and storage, and the company has never seen a component's price rise so sharply and so quickly."

After the announcement, Apple's stock closed down 6.15% on Thursday, while Microsoft fell 3.45%.

Apple's price adjustment this time covers multiple product lines, including MacBook, iPad, HomePod, Apple TV, and Vision Pro.

Looking at the specifics: The starting price of the MacBook Air has increased from $1,099 to $1,299, a rise of approximately 18%; the 16-inch MacBook Pro has jumped from $2,499 to $2,999, a single increase of $500; the iPad Air has risen from $599 to $749, a 25% increase; the entry-level iPad has gone from $349 to $449; and the Apple TV has increased from $129 to $199, a rise of over 54%.

The iPhone was not included in this price increase. However, Apple’s wording is noteworthy—the statement said it had “come time to begin raising prices on multiple products,” leaving room for further increases in the future.

On the Microsoft side, the standard edition of the Xbox Series X will increase in price to $800, a cumulative rise of $300 since its original launch price in 2020. Microsoft stated on its official blog: "We hope not to raise prices again; over the past several months, we have been negotiating various options with suppliers, but component prices have more than tripled and are expected to double again by fall 2027."

Xbox CEO Asha Sharma disclosed in an internal email that the company's expenses for storage and memory components are expected to be five times higher during the 2027 holiday season compared to 2024.

The root cause of this price increase lies in the large-scale competition for storage resources driven by AI infrastructure development.

According to FactSet data, the five major hyperscale cloud providers—Alphabet, Amazon, Meta, Microsoft, and Oracle—are expected to spend $741 billion on capital expenditures this year, a nearly 75% year-over-year increase.

Where did this money go? Columbia University economist Stijn Van Nieuwerburgh notes that building AI data centers is highly physical—it requires specialized cooling equipment, electricity and fiber optic cables, backup generators, and large amounts of high-bandwidth memory (HBM). He estimates that the total cost of AI infrastructure construction over the next six years could reach $8 trillion.

Suppliers have responded by shifting production capacity toward AI servers. According to Counterpoint Research, memory and storage prices have quadrupled over the past three quarters. This trend is directly reflected in the financial data of chip manufacturers: Micron’s latest quarterly gross margin surged from 39% a year ago to 84.9%, surpassing NVIDIA and Meta and reaching a record high.

As a result, AI companies have seized storage capacity originally allocated to consumer electronics, forcing Apple, Microsoft, and other manufacturers to compete for the remaining supply at higher prices, ultimately passing these costs on to consumers.

This cost pressure has left its mark on macroeconomic data.

According to the U.S. Department of Labor, consumer computer software and accessories prices rose approximately 15% year-over-year in May; wholesale electronic components and accessories prices surged 27% year-over-year.

Electricity prices are also under pressure. Goldman Sachs expects data centers to account for nearly half of the U.S. electricity demand growth before 2030 and forecasts consumer electricity prices to rise by approximately 6% annually in 2026 and 2027.

The price hike trend in the gaming hardware industry is also spreading. Sony PlayStation has raised prices multiple times, the suggested retail price for the Nintendo Switch 2 will increase to $500 in September, and Valve’s Steam Machine has also surpassed $1,000 in price.

Tarun Pathak, Director of Research at Counterpoint Research, estimates that higher component costs could increase Apple’s cost per iPhone by approximately $200, and anticipates price increases of $150 to $200 across Apple’s overall product line.

On Thursday, the Wall Street Journal reported that the AI infrastructure boom is fueling the third wave of inflation in the United States.

The article quotes Gregory Daco, Chief Economist at EY-Parthenon and President of the National Association for Business Economics (NABE), saying: "In the first phase of any major technological revolution, limited resources often come under pressure, which typically drives prices higher."

Unlike one-time economic shocks such as tariffs and oil prices, the impact of AI on demand could last for years. A survey by NABE this Monday found that 81% of respondents believe AI infrastructure development will push inflation higher over the next year.

However, there are also voices pointing to the other side. In November last year, current Federal Reserve Chair Walsh wrote in the Wall Street Journal that "AI will become a significant deflationary force, boosting productivity and enhancing U.S. competitiveness," and argued that "a 1 percentage point annual increase in productivity would double living standards within a generation."

UBS economists, however, believe there is still at least a several-year gap between the current construction boom and AI truly lowering prices.