Why have technology shares taken a hit after Apple raised prices?

Apple is finally ready to bite the bullet on prices. The tech giant on Thursday announced that it was raising prices across its range of Macs and iPads because of rising costs of memory and storage chips.

On June 25, Apple increased prices across its range of Macs and iPads, with many of its most popular models seeing hikes of as much as 20%.

“We have never seen a component price increase this much, this quickly,” Apple said in a statement, referring to chips that are critical components used in electronic devices like smartphones, tablets and laptops.

“The rapid expansion of AI data centres has created an extraordinary surge in demand for memory and storage,” the statement added. Against this backdrop, shares of Apple Inc. closed 6% lower on June 25.

However, the downward spiral spread across other technology stocks trading in the US as well as other Asian countries.

South Korean memory chip giants SK Hynix Inc. and Samsung Electronics Co. both slid more than 8%. Japan-based computer memory manufacturer Kioxia Holdings Corp. also sank as much as 12%. In the US market, Microsoft Corp. was down 3.5%, chipmaker Nvidia lost over 1.6%, while Alphabet fell around 1%.

Investors sold and rotated out of technology stocks on worries that rising prices of consumer electronics due to higher input costs will hamper demand. And lower demand for these products will ultimately slow the memory chip rally seen in the recent past that has powered the AI expansion.

Moreover, the extent of challenges for a company like Apple that is one of the world’s biggest technology names highlights the extent of struggles for smaller companies in dealing with prices.

Experts fear that broad-based price hikes may create an imbalance in the consumer electronics market, putting the future of all stakeholders in jeopardy.

Microsoft raises prices, too

On Thursday, Microsoft also announced a price hike for its gaming console. The company said it would raise the price of the 512 GB and 1 TB models of its Xbox gaming console by $100 and $150, respectively. New prices will take effect from August.

“Unfortunately, console storage and memory prices have increased by more than 2.5x and we expect another doubling by the fall of 2027,” the company said in a statement.

Xbox had previously hiked the price of its consoles in October by $20-70.