Apple and Microsoft forced to raise prices; Cook admits “unprecedented in 40 years”—is AI driving a new round of inflation?
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Apple and Microsoft announced price increases on the same day. This is likely not a coincidence—when the bill for the AI arms race starts getting passed on to ordinary consumers, a new wave of data center-driven inflation is quietly taking shape.
On Thursday, Apple announced global price hikes for Mac, iPad, and various other hardware products, with increases of up to $300. Microsoft also announced on the same day that Xbox game consoles would see their third price increase starting August 1, with some models rising by as much as $150. Both companies gave highly consistent reasons: The prices of storage and memory components have surged.
Apple CEO Tim Cook had previously sent a warning to the media. He described this supply crisis as a "once-in-a-century flood" and stated, "In more than 40 years in the industry, I have never seen anything like this." Apple directly pointed to the cause in its statement: "The rapid expansion of AI data centers has caused an extraordinary surge in demand for memory and storage. The company has never seen the price of any component rise this much, this fast."
After the announcement, Apple’s stock closed down 6.15% on Thursday, and Microsoft fell 3.45%.
Details of the price increases: Large range, broad coverage
Apple’s price adjustments span MacBook, iPad, HomePod, Apple TV, Vision Pro, and several other product lines.
Specifically: The starting price for MacBook Air has risen from $1,099 to $1,299, an increase of about 18%; the 16-inch MacBook Pro has jumped from $2,499 to $2,999, a single increase of $500; iPad Air has risen from $599 to $749, a 25% increase; entry-level iPad has increased from $349 to $449; Apple TV has risen from $129 to $199, an increase of more than 54%.
The iPhone was not included in this round of price hikes. However, Apple’s wording is noteworthy—the statement says it is “time to start raising prices for multiple products,” leaving room for further price increases in the future.
For Microsoft, the standard Xbox Series X will be priced at $800, accumulating a $300 increase over its original price set at launch in 2020. In its official blog, Microsoft stated: "We wish we did not have to raise prices again. We have been negotiating various options with suppliers for months, but the prices of components have already risen more than 2.5 times and are expected to double again by fall 2027."
Xbox CEO Asha Sharma revealed in an internal email that by the 2027 holiday season, the company’s spending on storage and memory components will be five times what it was in 2024.
Root cause: AI computing power arms race seizing storage capacity
The root cause of these price increases lies in the large-scale seizing of storage resources by AI infrastructure construction.
FactSet data shows that this year, the capital expenditure of the five largest hyperscale cloud providers—Alphabet, Amazon, Meta, Microsoft, and Oracle—is expected to reach $741 billion, a year-over-year increase of nearly 75%.
Where is this money going? Columbia University economist Stijn Van Nieuwerburgh points out that building AI data centers is highly physical—it requires specific cooling equipment, power and fiber-optic cables, backup generators, and vast quantities of high-bandwidth memory (HBM). He estimates that the total cost of AI infrastructure construction over the next six years could reach $8 trillion.
Suppliers are responding by shifting production capacity toward AI servers. According to Counterpoint Research, over the past three quarters, memory and storage prices have quadrupled. This trend is directly reflected in the financial data of chip manufacturers: Micron’s gross margin in the most recent quarter soared from 39% a year ago to 84.9%, surpassing Nvidia and Meta, and setting a historic record.
The result: AI companies have taken over storage capacity that was originally supplied to consumer electronics. Apple, Microsoft and other manufacturers can only compete for the remaining supply at higher prices, ultimately passing the costs onto consumers.
Inflationary pressure is spreading
This cost pressure has already left traces in macroeconomic data.
According to the US Department of Labor, prices for consumer computer software and accessories rose about 15% year-on-year in May; wholesale prices for electronic components and accessories jumped 27% year-on-year.
Electricity prices are also under pressure. Goldman Sachs projects that data centers will account for nearly half of new electricity demand in the US before 2030 and predicts that consumer electricity prices will rise by about 6% per year in 2026 and 2027.
The wave of price increases in the game hardware industry is also spreading. Sony’s PlayStation has increased prices several times, Nintendo Switch 2's suggested retail price will rise to $500 in September, and Valve’s Steam Machine console is now priced above $1,000.
Tarun Pathak, Research Director at Counterpoint Research, estimates that higher costs for components could increase the cost of each iPhone by about $200 and expects overall Apple product lines to see price increases of $150 to $200.
Controversy: Is AI inflation temporary or sustained?
On Thursday, the Wall Street Journal editorialized that the AI infrastructure boom is creating America’s third wave of inflation.
The article quoted Gregory Daco, chief economist at EY-Parthenon and president of the National Association for Business Economics (NABE), who said: "In the first stage of any major technological revolution, limited resources tend to be under pressure, which usually pushes prices up."
Unlike one-off economic shocks such as tariffs and oil prices, the shock of AI on demand may last for years. NABE's survey this Monday showed that 81% of respondents believe AI infrastructure construction will drive up inflation in the coming year.
However, there are opinions pointing to the other side. Current Fed chairman Waller wrote in the Wall Street Journal in November last year that "AI will be a major deflationary force, boosting productivity and enhancing US competitiveness" and believes "a 1 percentage point annual productivity increase will double living standards within a generation."
UBS economists believe that there will be at least a few years of lag between the current construction boom and AI actually driving prices down.
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