Latest / Best of Business / Sam Dickie: Fisher Funds expert on how the memory shortage could impact the tech sector

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Sam Dickie: Fisher Funds expert on how the memory shortage could impact the tech sector · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed B.
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  Speaker 1: Follow this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: Now AI. When we talk about the AI shortages, everyone
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  Speaker 2: thinks and video chips, But the real bottleneck right now
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  Speaker 2: is the memory, and it's quietly driving a huge slice
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  Speaker 2: of the global share market. Sam Dickey joins us from
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  Speaker 2: Fisher Funds to explain what's going on. Hi Sam, Hi
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  Speaker 2: either okay, explain what's going on with the memory? What
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  Speaker 2: is it? And why now?
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  Speaker 3: Yes, think of memory chips as AI's notepad. Every AI
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  Speaker 3: chip needs a stack of memory to work. So give
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  Speaker 3: you a couple of stats. S k Heinex, the world's
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  Speaker 3: biggest memory maker, has sold out of every chip they'll
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  Speaker 3: make in twenty twenty six, and the spot price that
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  Speaker 3: customers are paying for this memory is up hundreds of
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  Speaker 3: percent in the last few months alone. We've never seen
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  Speaker 3: such a frenzied price rise. And the forty to fifty
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  Speaker 3: years memory has been a thing, So why now? The
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  Speaker 3: AI itself has changed. So the old chatbots we remember,
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  Speaker 3: the early chat GPT, we're kind of like smart calculate
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  Speaker 3: is question and answer out and the new AI chatbots
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  Speaker 3: actually think deeply before they answer, and then they work
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  Speaker 3: through problems step by step. So that needs way way
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  Speaker 3: more memory at every step. And then you multiply that
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  Speaker 3: by billions of users worldwide, and we've got an acute
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  Speaker 3: memory shortage right now.
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  Speaker 2: Okay, so the price for the memory has gone up, right?
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  Speaker 2: How big has this become for the whole share market?
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  Speaker 2: And is the sustainable?
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  Speaker 3: Yeah? That is that stat is quite a shock. So
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  Speaker 3: one stock alone, Micron, which is the US memory champion,
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  Speaker 3: eis ka Heinez is the Korean memory champion. Micron accounts
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  Speaker 3: for over fifty percent. This is one stock of all
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  Speaker 3: profit upgrades for the entire American share market this year.
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  Speaker 3: And here's the thing. When prices spiked like this for
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  Speaker 3: a commodity, any commodity, and memory has historically absolutely been
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  Speaker 3: a very volatile commodity, people normally start buying less. And
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  Speaker 3: we're seeing that now. So worldwide smartphone sales, for example,
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  Speaker 3: which use this memory as well, are expected to fall
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  Speaker 3: sharply this year, the biggest drop in over a decade
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  Speaker 3: PC sales. Also, people are putting off buying that new
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  Speaker 3: phone because the cost of memory is driving up the
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  Speaker 3: price of the phone too much. But here's the twist.
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  Speaker 3: So Microsoft, Meta in Google in their data centers are
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  Speaker 3: prepared to pay those really high prices for memory without blinking.
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  Speaker 3: For them, memories only about a tenth of the cost
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  Speaker 3: of an AI computer, which is where in videos chip
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  Speaker 3: is the bulk. So the thing that could really end
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  Speaker 3: the superstar cycle isn't you or me skipping a phone upgrade.
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  Speaker 3: It's really one of those big tech companies deciding they're
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  Speaker 3: not prepared to pay that much for memory.
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  Speaker 2: Ah, what does that all mean for investors?
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  Speaker 3: Then it's extremely overcooked. So he's an example of how
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  Speaker 3: overcooked the expectations have become. Micron, so that's the US
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  Speaker 3: memory champion has made seventy billion dollars profit and aggregate
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  Speaker 3: across its entire fifty year history. So that's what maybe
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  Speaker 3: one to two billion dollars per annum. The market now
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  Speaker 3: expects Micron to make eighty billion dollars this year year alone,
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  Speaker 3: more than they've made in total in fifty years. Then
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  Speaker 3: one hundred and twenty billion dollars a year every year
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  Speaker 3: for the next five years. But I mentioned this before.
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  Speaker 3: Memory chips really are a commodity like oil or copper
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  Speaker 3: a week, they're easy to make no real point of
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  Speaker 3: difference in history over the last fifty years is full
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  Speaker 3: of cycles where high prices tempt everyone to build more
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  Speaker 3: memory than prices crash and the whole industry loses money. However,
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  Speaker 3: the market is betting that it's different this time, and
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  Speaker 3: the Micron can make eighty cents of profit on every
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  Speaker 3: dollar of sales forever and that has never happened, So
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  Speaker 3: it's definitely one to keep.
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  Speaker 1: An eye on.
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  Speaker 2: Yeah, thanks for pointing that out, Sam, really appreciate it.
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  Speaker 2: Sam ticky Fish to.
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