Macflation is here! Micron surges while Apple slumps, highlighting an AI industry chain profit revaluation.

AI Industry Chain Boom is Evolving into a Brutal Zero-Sum Game The boom of the AI industry chain is evolving into a brutal zero-sum game. The awakening of upstream hardware pricing power is relentlessly squeezing the profit margin of downstream tech giants, reshaping the global tech sector’s market value distribution pattern. Micron Technology’s strong financial report and Apple’s global price increase of core hardware have become direct catalysts for this profit re-evaluation. On the first trading day after its report, this Thursday, Micron (MU) saw its market value surge by over $260 billion in one day due to a sharp rise in stock price, while Apple (AAPL) had its market value evaporate by more than $180 billion, with its stock price plunging over 6%, directly causing the Nasdaq 100 index to “flash drop” after an early 2% jump. Market trading logic has rapidly shifted from early-stage AI demand resonance to industry chain cost competition. Funds are accelerating their withdrawal from downstream terminals and cloud service providers facing cost pressures, concentrating instead on upstream infrastructure sectors with strong pricing power and profit retention capability. This extreme structural divergence is not only evident within US stocks but also spreads across markets, highlighting that in the deep waters of the AI arms race, the struggle for pricing power between upstream and downstream supply chains has become the core variable determining asset valuation. Market Value Redistribution: From Demand Resonance to Cost Competition Micron Technology’s latest financial report underscores strong demand for storage chips in AI data centers, with the company’s stock rising nearly 16% on Thursday, boosting the Philadelphia Semiconductor Index by up to 6%. However, the market has keenly sensed the hidden concern behind the boom: continued price increases of upstream storage chips are becoming a heavy cost burden for downstream tech giants. As the AI arms race enters deeper phases, Microsoft, Amazon, Meta, and other cloud companies’ capital expenditure on computing power infrastructure remains high. With storage chips being key components in data centers, their soaring prices directly erode the profit margins and free cash flow of these downstream giants. Investors are beginning to realize that profits in the AI industry chain are concentrating upstream, and the profit expectations for downstream applications and cloud service providers are at risk of downward revision. Against the backdrop of industry chain profit re-evaluation, the tech sector is displaying extreme divergence. Funds are decisively withdrawing from downstream terminals and cloud service providers facing cost pressure and flowing into higher-certainty upstream hardware sectors, resulting in significant surges in storage chips and optical communication concepts, while downstream tech giants collectively declined and dragged down the Nasdaq index. “Macflation” Arrives and Supply Chain Openly Fractures Apple’s adjustment of pricing strategy provides the most direct proof of upstream costs being passed on to end products. The market has termed this phenomenon “Macflation” (Apple inflation). Faced with substantial price increases in storage chips and components, Apple has officially, globally raised prices on many products including MacBook Neo, MacBook Air, iMac, Mac Studio, iPad, and Vision Pro. This cost-passing strategy directly triggered an open fracture between upstream and downstream supply chains. Apple CEO Tim Cook publicly blamed the price increases on memory suppliers, while Micron executives refuted this in interviews, pushing responsibility back to Apple. Micron’s Chief Business Officer Sumit Sadana said in a media interview Wednesday night that during a previous downturn in the storage chip market, Micron’s gross margin even fell into negative territory, making it impossible for the company to invest, partly due to some customers driving prices down and forcing Micron to accept extremely low quotes. Sadana did not name Apple but recalled, “At the time, we pointed out to several aggressive customers that such practices do not benefit industry development,” adding that customers’ low prices stifle capital investment. “Due to low prices and margins, many investment projects in the industry were terminated in 2023.” This open mutual blaming reveals fierce disagreements between the parties over cost transfer and pricing responsibility in the supply chain. The market’s concerns are not only about price increases possibly suppressing consumer electronics demand but also about Apple’s recent abandonment of its net cash neutral financial target and accelerated AI computing power investments. The double pressure of rising hardware costs and increased capital expenditure in AI caused Apple’s stock to plunge 5.1% in one day, becoming a major drag on the broader market. Cross-Market Divergence: Capital Reshaping the AI Investment Theme Against the backdrop of industry chain profit re-evaluation, the divergence in the tech sector has now spread across markets. So far this year, European tech stocks have significantly outperformed US tech stocks, mainly due to differences in semiconductor supply chain weights. About two-thirds of the European tech index’s weight is concentrated in semiconductor and equipment manufacturers such as ASML—these “water sellers” retain strong pricing power. In contrast, US indices weigh more heavily on software and platform companies, which are downstream actual chip users and more vulnerable to rising chip costs. Micron’s financial report and Apple’s price increase together established a new market consensus: during the AI infrastructure boom, upstream hardware suppliers will enjoy both booming volume and rising prices, while downstream tech giants must struggle to defend their profit boundaries amid high hardware costs and fierce market competition. Risk Warning and Disclaimer The market entails risks, and investment requires caution. This article does not constitute individual investment advice and has not accounted for any specific user’s unique investment objectives, financial situation, or requirements. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investment based on this is at your own risk.