By Adam Clark
Apple and Dell Technologies could take a hit to their margins from higher prices for memory products but still come out winners.
Booming demand for artificial-intelligence systems is driving sales of memory chips and storage products. Memory prices are expected to surge 40%-50% in the current quarter, after a similar gain in the final quarter of 2025, according to Counterpoint Research.
While that is great news for memory and storage companies such as SanDisk, Seagate Technology and Western Digital, it isn't so good for makers of personal computers and mobile phones. As prices of NAND flash memory and DRAM memory chips rise, companies would have to absorb that cost, pinching their margins, or risk hurting demand by passing it on to consumers.
"We think cost inflation, especially on DRAM and NAND, could be a sizable drag to margins in CY26, particularly if the cost inflation doesn't slow down," wrote Evercore analyst Amit Daryanani in a research note on Wednesday.
However, Apple and Dell are relatively well protected, according to Daryanani. He pointed to Apple's scale and long-term supply-chain agreements, and Dell's tilt toward commercial PCs rather than consumer hardware, as mitigating factors.
Apple will face a challenge. Memory can make up around 10%-15% of the total bill of materials for a high-end smartphone such as an iPhone according to the research firm IDC. But it also has ways to offset the cost.
"In-housing more chip design is the most obvious lever for Apple to pull with respect to product gross margins and we think the 5G modem chip is the most likely candidate," wrote Daryanani.
Overall, Apple should be able to modestly expand its gross margins as revenue shifts toward its high-margin services business, the Evercore analyst argues. That could help support double-digit growth in earnings per share through to fiscal 2029 as revenue rises and the company buys back stock.
Daryanani has an Outperform rating and $325 target price on Apple stock. The shares were down 0.1% at $262.23 in morning trading Wednesday.
He noted that commercial customers represented more than 80% of Dell's overall PC sales in the third quarter of 2025. The ability to raise prices on commercial PCs could mean it isn't hit as much by costlier memory components.
"Something to monitor in 2026 will be memory prices and how OEMs [original equipment manufacturers] mitigate these costs, and ultimately, what happens to consumer demand as PC prices begin to increase," Daryanani wrote.
The Evercore analyst has a $180 target price and an Outperform rating on Dell. He says the company stands to benefit from AI over the long term, meaning it could exceed its recently released long-term targets of annual revenue growth of 7%-9% and earnings per share growth of more than 15%.
Dell shares were down 3% at $120.22 in morning trading. Dell was a Barron's stock pick late last year, when the shares traded at around $165.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 07, 2026 12:04 ET (17:04 GMT)
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