Sam Dickie: Fisher Funds expert on how the memory shortage could impact the tech sector

The cost of computer components has shot up, and there's concerns about what it could mean for the tech sector.

The shortage of memory chips has prompted tech investors to worry about what this could mean for the market.

Sam Dickie from Fisher Funds explained further.

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Episode Transcript

Speaker 1 (00:00):
Now AI. When we talk about the AI shortages, everyone
thinks and video chips. But the real bottleneck right now
is the memory, and it's quietly driving a huge slice
of the global share market. Sam Dickey joins us from
Fisher Funds to explain what's going on? Hi Sam, Hi Hei?
That okay, explain what's going on with the memory? What
is it and why now?

Speaker 2 (00:19):
Yes, think of memory chips as AI's notepad. Every AI
chip needs a stack of memory to work. So give
you a couple of stats. S k Heinez, the world's
biggest memory maker has sold out of every chip they'll
make in twenty twenty six, and the spot price that
customers are paying for this memory is up hundreds of
percent in the last few months alone. We've never seen

(00:39):
such a frenzied price rise. And the forty to fifty
years memory has been a thing, So why now The
AI itself has changed. So the old chatbots we remember,
the early chat GPT, we're kind of like smart calculators,
question and answer out and the new AI chatbots actually
think deeply before they answer, and then they work through
problems step by step, So that needs way way more

(01:01):
memory at every step. And then you multiply that by
billions of users worldwide, and we've got an acute memory
shortage right now.

Speaker 1 (01:08):
Okay, so the price for the memory has gone up, right,
How big has this become for the whole share market?
And is the sustainable?

Speaker 2 (01:18):
Yeah? That is that stat is quite a shock. So
one stock alone, Micron, which is the US memory champion
East k Heinez is the Korean memory champion. Micron accounts
for over fifty percent. This is one stock of all
profit upgrades for the entire American share market this year.
And here's the thing. When prices spiked like this for
a commodity, any commodity, and memory has historically absolutely been

(01:42):
a very volatile commodity, people normally start buying less. And
we're seeing that now. So worldwide smartphone sales, for example,
which used this memory as well, they're expected to fall
sharply this year, the biggest drop in over a decade
PC sales. Also, people are putting off buying that new
phone because the cost of the memory is driving up
the price of the phone too much. But here's the twist.

(02:03):
So Microsoft, Meta in Google in their data centers are
prepared to pay those really high prices for memory without blinking.
For them, memories only about a tenth of the cost
of an AI computer, which is where in videos chips
the bulk. So the thing that could really end the
superstar cycle isn't you or me skipping a phone upgrade.
It's really one of those big tech companies deciding they're

(02:25):
not prepared to pay that much for memory.

Speaker 1 (02:27):
Ah, what does that all mean for investors?

Speaker 2 (02:29):
Then it's extremely overcooked. So here's an example of how
overcooked the expectations have become. Micron, So that's the US
memory champion. Has made seventy billion dollars profit and aggregate
across its entire fifty year history. So that's what maybe
one to two billion dollars per annum. The market now
expects Micron to make eighty billion dollars this year alone,

(02:52):
more than they've made total in fifty years. Then one
hundred and twenty billion dollars a year every year for
the next five years. But I mentioned this before. Memory
chips really are a commodity like oil or copper a whek.
They're easy to make, no real point of difference in
history over the last fifty years is full of cycles
where high prices tempt everyone to build more memory than prices,

(03:14):
crash and the whole industry loses money. However, the market
is betting that it's different this time, and that Micron
can make eighty cents of profit on every dollar of
sales forever, and that has never happened, So it's definitely
one to keep an eye on.

Speaker 1 (03:28):
Yeah, thanks for pointing that out, Sam, really appreciate it.
Sam Ticki Fisher Funds for more from Heather Duplessy Allen Drive.
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