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Micron stock has risen 1,000% in the past three years on the back of the memory pricing boom. (Photo Illustration by Igor Golovniov\/SOPA Images\/LightRocket via Getty Images)<\/span><\/p>\n SOPA Images\/LightRocket via Getty Images<\/small><\/div>\n<\/div>\n<\/figure>\n After a red-hot inflation report this week that showed the annual consumer price index rising to 3.8%, affordability is on people\u2019s minds. But plain-old consumer inflation pales in comparison to the inflation in data centers. <\/p>\n In the technology markets, inflation is all over the place, most notably in the stratospheric rise in technology components such as memory and storage devices, sales of which are driven by the AI capital spending boom. This is driving inflation in stock prices as well, as memory stocks such as Micron and Sandisk lead the current rally. <\/p>\n The key building blocks of data centers, including memory, storage, and AI, have been vaulting higher at rates as high as 90% per quarter. This has been a boon for memory companies such as Micron, whose stock has shot up 1,100% in three years. <\/p>\n It\u2019s of course unknown when this red-hot market will cool off, but one thing should be noted: The inflation component of the tech rally isn\u2019t necessarily good, just like the rising price of gasoline or your car insurance isn\u2019t good. Rising costs create more risks for markets, because it\u2019s hard to measure and predict how much inflation is driving a temporary, and unsustainable, illusion of growth. <\/p>\n When stuff costs more, that\u2019s not necessarily good. It\u2019s a cost. Memory prices are famously volatile, and the technology is generally considered a commodity. That means that the current revenue boost and profit margins should be considered temporary, as history has shown. <\/p>\n Rising prices are also not good for building infrastructure. Memory is to infrastructure what gasoline is to car travel. When the price goes up, it adds to the cost of everything in the technology supply chain, from your mobile device to the servers driving AI consumption. The inflation is feeding through to every piece of equipment in the system.<\/p>\n Memory pricing has been popping up in many technology earnings calls, as executives decide how much of the cost they can pass on by rising prices. In fact, it was a topic of discussion in the earnings calls from network infrastructure providers Fastly and Akamai\u2019s calls last week. Akamai said it was passing on costs, and Fastly said it wasn\u2019t. Fastly\u2019s stock fell 30% and Akamai\u2019s stock went up. Case closed. <\/p>\n This demand boom has been great for memory companies such as Samsung, SK Hynix, and Micron, which are estimated to control more than 90% of the DRAM market worldwide, but it\u2019s not good for the rest of the world. It\u2019s like celebrating the performance of Exxon just as you are about to go on a summer vacation road trip. <\/p>\n<\/section>\n Here\u2019s the big question: How much of the increase in tech revenues, capex, and electronics spending is attributable to price inflation?<\/p>\n The stock market might be over-optimistic about the sustainability of memory pricing, but this also causes other problems. Volatile pricing causes difficulty in the supply chain, where some companies might start hoarding or double-ordering memory. That sets the stage for more volatility.<\/p>\nMemory, The Most Popular Commodity<\/h2>\n
Creative Workarounds <\/h2>\n