AI-led DRAM supply crunch reportedly has Morgan Stanley downgrading major OEMs — skyrocketing memory prices could erode server and PC margins

The ongoing DRAM shortage and subsequent doubling (or more) in price we’ve seen in recent weeks is a serious hurdle for prospective PC builders, and threatens to make computing and electronics devices pricier for at least a couple of years. According to X posts by @juklanosreeve (Jukan), Morgan Stanley’s market analysts believe that even large manufacturers and integrators are set to take hits, going as far as downgrading stock position advice ratings for some.

For reference, Morgan Stanley has three ratings for stock performance predictions: OW (Overweight, or good), EW (Equal-weight, or neutral), and UW (Under-weight). Dell reportedly got a hard slap from OW to UW, while HP, Asustek, and Pegatron went from EW to OW.

Other OEMs like Acer and Compal were already UW to begin with. Morgan Stanley revised the stock price targets by roughly 20% for most of the aforementioned companies. The reason why Dell got a harsher prediction than the rest is because it sells a lot of servers, and servers normally utilize gargantuan amounts of RAM.

In a separate chart, MS estimates that memory alone for a “high-end” server is a whopping 40% of its materials cost (BOM, Bill of Materials). A “general-purpose” server doesn’t fare much better, at 30%. Standard and “AI” PCs (whatever that means today) sit at 20% and 15% respectively.

If you’re wondering why Apple is still rated OW, Jukan states that the Cupertino giant bought up a huge supply of DRAM before the shortage came into full effect, and also has a long-term agreement with Kioxia for presumably a chunk of its production.

Given how Apple has generally dealt with such crises in the past and is the type of company to plan ahead, Jukan may be right. It isn’t difficult to hypothesize that Macs, iPads, and iPhones might see only a small price increase, if any, and should continue to be widely available for the time being.

It seems likely that Morgan Stanley believes OEMs/ODMs will eat part of the cost of the DRAM, lowering their margins, instead of just passing it all on to customers. That’s probably as good an illustration as any of how bad the crisis really is.