The AI Boom Is Coming for Apple’s Profit Margins

Apple has dominated the electronics supply chain for years. No more.

Artificial-intelligence companies are writing huge checks for chips, memory, specialised glass fibre and more, and they have begun to out-duel Apple in the race to secure components.

Suppliers accustomed to catering to Apple’s every whim are gaining the leverage to demand that the iPhone maker pay more.

Apple’s normally generous profit margins will face pressure this year, analysts say, and consumers could eventually feel the hit.

Chief Executive Tim Cook mentioned the problem in a Thursday earnings call, saying Apple was seeing constraints in its chip supplies and that memory prices were increasing significantly.

Those comments appeared to weigh on Apple shares, which traded flat despite blowout iPhone sales and record company profit.

“Apple is getting squeezed for sure,” said Sravan Kundojjala, who analyses the industry for research firm SemiAnalysis.

AI chip leader Nvidia recently became the largest customer of Taiwan Semiconductor Manufacturing , or TSMC, Nvidia Chief Executive Jensen Huang said on a podcast.

Apple had been TSMC’s biggest customer by a wide margin for years. TSMC is the world’s leading manufacturer of advanced chips for AI servers, smartphones and other computing devices.

Spokesmen for Apple and TSMC declined to comment.

The big computers that handle AI tasks don’t look like the smartphones consumers own, but many companies supply components for both. In particular, memory chips are in short supply as companies such as OpenAI, Alphabet’s Google, Meta , Microsoft and others collectively spend hundreds of billions of dollars to build AI computing capacity.

“The rate of increase in the price of memory is unprecedented,” said Mike Howard , an analyst for research firm TechInsights.

That applies both to the flash memory chips that store photos and videos, called NAND, as well as the memory used to run apps quickly, called DRAM.

By the end of this year, the price of DRAM will quadruple from 2023 levels, and NAND will more than triple, estimates TechInsights.

Howard estimates that Apple could pay $57 more for the two types of memory that go into the base-model iPhone 18 due this fall compared with the base model iPhone 17 currently on sale. For a device that retails for $799, that would be a big hit to profit margins.

Apple’s purchasing power and expertise in designing advanced electronics long made it an unrivaled Goliath among the Asian companies that make most of the iPhone’s parts and assemble the device.

Apple spends billions of dollars a year on NAND, for instance, according to people familiar with the figures, likely making it the single biggest buyer globally. Suppliers flocked to win Apple’s business, hoping to leverage its know-how and prestige to attract other customers.

These days, however, “the companies now pushing the boundaries of human‑scale engineering are the ones like Nvidia,” said Ming-chi Kuo, an analyst with TF International Securities.

Demand for AI hardware is poised to keep growing rapidly. Apple’s spending growth is modest in comparison with what is being spent to fill up AI data centers, even though it is breaking records with huge sales of the iPhone 17.

Samsung Electronics and SK Hynix are raising the price of a type of DRAM chip for Apple, according to people familiar with Apple’s supply chain.

Big AI companies pay generously and are willing to lock in supply and make upfront payments, giving the South Korean chip makers leverage against the iPhone maker.

Apple signs long-term contracts for memory, but it has used its heft to squeeze suppliers.

Its contracts have empowered it to negotiate prices as often as weekly, and to even refuse to buy any memory from a supplier if Apple didn’t view the price as favorable, according to people familiar with its memory purchases.

To boost leverage with suppliers, Apple even began stocking more inventory of memory. That was atypical for Cook, who normally cuts inventory to the bone to maximize Apple’s cash flow.

Apple is fighting not only for current deliveries but also for the attention of engineers at suppliers.

Glass scientists who worked on developing the smoothest and lightest smartphone displays are now also spending time on specialised glass for packaging advanced AI processing chips, according to industry executives.

Makers of sensors and other gizmos inside the iPhone are winning new business from AI companies such as OpenAI that are developing their own hardware.

Still, suppliers said they were far from giving up on business with Apple. Working with Apple is a form of education, they said, because it remains one of the most demanding and disciplined customers in the industry.

TSMC, the Taiwanese chip manufacturer, has built successive generations of its most advanced chips with Apple as its lead customer, relying on the big predictable demand for iPhones.

Now that TSMC is doing more business with Nvidia and other AI companies, people with knowledge of the chip supply chain said Apple was exploring whether some lower-end processors could be made by someone other than TSMC.

One of Apple’s biggest profit-spinners is selling extra memory for far more than the memory chips cost the company.

Last fall Apple discontinued the iPhone Pro model with 128 gigabytes of storage.

Customers who want that model must now start at 256 gigabytes and pay $100 more—the type of move that could be repeated this year to help Apple offset higher costs, wrote Craig Moffett, an analyst at Moffett Nathanson, in an investor note.

However, Apple isn’t expected to raise the price of its next iPhone models over similarly equipped iPhone 17s, said Kuo, the analyst.

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LVMH Moët Hennessy Louis Vuitton wrapped up last year’s final quarter with sluggish sales growth, a sign that shoppers weren’t splurging on its collections of high-end garments and handbags in the run-up to the holiday season.

The French luxury-goods giant posted fourth-quarter sales of 22.72 billion euros ($27 billion), up 1% organically. Analysts had forecast €22.59 billion in sales and an organic decline of 0.3%, according to Visible Alpha.

LVMH’s fashion and leather goods division, which houses brands like Louis Vuitton and Dior, contributed €10.16 billion in sales, down 3% organically.

Sales at perfumes and cosmetics declined 1%, while the wines and spirits division reported a 9% contraction in sales. Selective retailing, the unit behind Sephora, fared better, with a 7% increase in sales, while watches and jewelry logged 8% growth.

For LVMH and the wider luxury-goods sector, the final quarter represents a key test of customers’ willingness to indulge on nonessential items in the run-up to Black Friday, Thanksgiving and Christmas.

Earlier this month, British trench-coat maker Burberry Group , Italian luxury-fashion house Brunello Cucinelli and Cartier owner Cie. Financière Richemont all reported higher sales for the quarter, raising the bar for industry bellwether LVMH.

Weak sales growth shows that LVMH’s collections aren’t appealing to clients and that the group is still contending with a slowdown in spending for luxury goods that has plagued the industry for years.

Demand weakened considerably after a postpandemic boom, especially among less affluent shoppers. The downturn has been particularly acute in China—a key market for LVMH and its rivals—as shoppers there have been holding back spending.

Last year brought a dose of uncertainty for LVMH and the sector as it took several months for the European Union to reach a trade deal with the U.S. after President Trump announced his Liberation Day tariffs.

Luxury goods are particularly sensitive to trans-Atlantic trade frictions and the specter of tariffs has never fully disappeared despite that trade deal.

Last week, LVMH and other luxury stocks slumped after Trump threatened 10% levies on various European countries he said were opposed to a U.S. takeover of Greenland. He subsequently called off those tariffs.

LVMH closed 2025 with €80.81 billion in annual sales, down 1% organically. Analysts had forecast €80.65 billion in 2025 sales with a 1.8% organic decline, according to Visible Alpha.

The group said revenue declined in Europe in the second half of the year, while the U.S. benefited from solid demand.

Sales in Japan were down from 2024, but the company said it had seen a noticeable improvement in trends in the rest of Asia, citing a return to growth in the second half of the year.

In an earnings call, executives expressed confidence for 2026 despite an uncertain geopolitical and macroeconomic environment, saying the positive trends they started to see in the second half were still there.

Net profit slid 13% on year to €10.88 billion, while profit from recurring operations fell 9% to nearly €17.76 billion. Analysts had forecast net profit of 10.55 billion euros and profit from recurring operations of €17.15 billion, according to Visible Alpha.

The group said it would propose a dividend of €13 a share at its shareholders’ meeting on April 23, the same as the previous year.

The AI Boom Is Coming for Apple’s Profit Margins

Parts for iPhones to cost more owing to surging demand from AI companies.

French luxury-goods giant’s results are a sign that shoppers weren’t splurging on its collections of high-end garments in the run-up to the holiday season.