Micron shares jumped 8.1% in premarket trading on Monday, boosted by renewed interest in AI stocks and a clear sign of how serious the memory chip shortage has become. Microsoft’s Xbox division issued an unexpected public warning about a hardware component crisis, showing that the memory supply crunch affects more than just AI servers. Here’s what the Xbox announcement means and why analysts believe the shortage could last until at least 2027.
Microsoft’s new Xbox chief said in a public memo that the division is dealing with a hardware component crisis, as memory costs have increased about five times in the last two years. The company cannot make enough consoles to meet demand. This matters because gaming consoles have fixed production costs, so manufacturers cannot easily raise prices to cover higher component costs like PC and smartphone makers can.
Wedbush said the Xbox warning confirms that rising memory prices now affect not just PCs and phones, but also fixed-cost hardware like gaming consoles. This supports the analyst’s view that the memory shortage could last through 2027 and possibly longer.
Micron’s stock is still valued much lower than the overall market. As of Friday’s close, it traded at 9.74 times forward earnings, compared to 25.5 times for the Nasdaq Composite, according to FactSet. This difference is due to the memory industry’s history of big ups and downs, which makes investors cautious about high earnings. But as more evidence points to a long-term supply shortage, some are rethinking whether Micron’s lower valuation is still fair.
Overall market sentiment also helped boost Micron’s stock on Monday, as hopes for a U.S.-Iran peace deal made investors more willing to buy technology stocks.
