AI server makers are increasing memory purchases, putting consumer electronics under greater procurement cost pressure. This week, Counterpoint research noted that AI agents are driving up demand for standard memory paired with CPUs; Nvidia has reportedly asked TSMC to study 3D DRAM in search of new supply options. Apple and Qualcomm earnings reports show that rising memory prices have already affected gross margin expectations and smartphone makers’ production plans.

1. AI-driven memory demand goes beyond HBM

AI servers need HBM paired with GPUs, as well as DDR and LPDDR memory for CPUs. When AI agents call tools, run code, and process data, CPUs also handle a substantial workload. Research released by Counterpoint on November 5 noted that agentic AI is driving up demand for CPUs and the standard DRAM paired with them, with revenue growth for DDR and LPDDR even outpacing HBM.

Nvidia’s product specifications show that the Vera CPU supports up to 1.5 TB of LPDDR5X memory, more than three times the previous-generation Grace CPU’s maximum capacity of 480 GB. LPDDR is low-power memory commonly used in smartphones and also found in some AI servers. The two have different device, module, and certification requirements and cannot be directly substituted for each other. However, suppliers need to allocate process capacity and investment across different products. TrendForce previously noted that demand for AI server products is strong and returns are higher, prompting suppliers to prioritize related capacity and affecting supply for end markets such as smartphones.

2. Major customers secure supply early, but prices will still adjust

Cloud providers have begun using long-term agreements to secure supply. SK Hynix disclosed on October 28 that it had signed long-term agreements with 14 major customers, including large cloud service providers, covering more than half of its total capacity for 2027 and 2028. These agreements do not lock in prices completely; contract prices can still be adjusted within ranges agreed with customers based on market conditions. A public summary of TrendForce’s November 4 report also noted that suppliers in the industry are securing demand and funding through terms such as price floors, purchase-volume commitments, and advance payments.

New supply will also take time. On November 6, Reuters, citing The Information, reported that TSMC had reportedly been asked by Nvidia to study the production of 3D DRAM and was evaluating whether to build a new factory or acquire and retrofit an existing one. Neither company has formally confirmed the report, and the scale of investment and production timeline remain unclear. Even if the plan moves forward, technical validation, factory construction or retrofitting, and customer qualification will all be needed before it can translate into actual supply, making it unlikely to ease near-term procurement pressure.

3. Apple’s profits come under pressure as Qualcomm faces customer production cuts

Apple’s revenue this quarter was about $114.5 billion, up 12% year over year, but it forecast a gross margin of 45% to 46% for the December quarter. This quarter’s 47.9% gross margin included a benefit of about 1 percentage point from tariff refunds. Excluding that, the margin was about 46.9%, roughly 1.4 percentage points above the midpoint of next quarter’s guidance at 45.5%. Apple said that most of the expected sequential decline on an adjusted basis would come from higher memory costs.

Price increases are already unfolding at different paces across products. A public summary of Counterpoint’s November 6 report noted that smartphone memory prices are stabilizing in the fourth quarter, while server DRAM remains the main driver of price increases. Procurement negotiations for early 2027 point to further increases. Apple has already raised prices on some products, and lower-cost inventory purchased earlier has provided a buffer. However, the company expects memory procurement prices to continue rising, and the benefit from inventory will gradually diminish. As lower-cost inventory is depleted, higher procurement prices will increasingly be reflected in the cost of sales.

Rising memory prices are also affecting Qualcomm’s smartphone chip orders. Revenue from the company’s mobile chip business was $5.137 billion in its fiscal fourth quarter, down 26% year over year. In explaining changes to its business over the year, Qualcomm said that some major customers had adjusted smartphone production plans and reduced inventory because of tight memory supply and higher prices, which in turn led them to cut chip purchases. In addition, its customer Apple has adopted its own modem chips in some phones, and Qualcomm expects the scope of this substitution to expand, further weighing on chip revenue.

This week’s takeaway

Growing AI server demand for conventional memory is putting more cost pressure on consumer electronics. Apple has raised prices on some products but still expects its gross margin to decline next quarter, while the cushion from lower-cost inventory is shrinking. Qualcomm’s disclosure of customer production adjustments shows that some smartphone makers are already responding to higher prices by producing and purchasing less. The risk to consumer electronics now extends beyond component procurement to profits and orders: how much memory prices rise is one question; how much device makers can pass on to consumers—and how many sales they may lose as a result—is the question worth watching in the next round of earnings reports.