Memory Chip Squeeze Widens Gap Between Winners and Losers

The relentless surge in memory chip prices over the past few months has driven a vast divide between winners and losers in the stock market, and investors don’t see any end in sight, Winnie Hsu reported for Bloomberg News.

Memory chip shortages and pricing are being mentioned frequently by companies in earnings reports and conference calls.

Companies from game console maker Nintendo Co. to big PC brands and Apple Inc. suppliers are seeing shares slump on profitability concerns. Memory producers, meanwhile, are soaring to unprecedented heights.

Money managers and analysts are now assessing which firms can best navigate the squeeze by locking in supplies, raising product prices, or redesigning to use less memory.

A Bloomberg gauge of global consumer electronics makers is down 10% since the end of September, while a basket of memory makers, including Samsung Electronics Co., has surged roughly 160%.

The question now is how much is priced in.

“What remains underappreciated is the risk around duration — current valuations largely factor in that the disruption will normalize within one to two quarters,” said Vivian Pai, a fund manager at Fidelity International.

“We believe industry tightness is likely to persist,” possibly through the rest of the year, she added.

Memory chip shortages and pricing are being mentioned frequently by companies in earnings reports and conference calls. In one of the latest examples, Honda Motor Co. noted recently that supply risks are emerging for memory components.