Written by: Chaoxiang Research

On Thursday, significant divergence was observed in U.S. stocks amid the transmission of storage costs. Micron surged over 15%, SanDisk skyrocketed more than 20%, and the pricing power of storage chips awakened, but Apple plummeted 6%, leading the decline among the seven major tech giants. This world’s most profitable tech company was forced to announce global price increases, with the MacBook Air rising by $200 and the iPad Air increasing by 25%. Microsoft followed suit, raising the price of Xbox for the third time in 13 months. A profit reassessment is unfolding from the bottom-layer chips to downstream consumer electronics.

Market Performance

The S&P 500 fell 0.01% to 7357.49 points, the Nasdaq dropped 0.46% to 25358.60 points, and the Dow rose 0.14% to 51920.62 points. The Nasdaq has declined for four trading days, with the technology sector under continued pressure, yet showing significant internal divergence. Micron surged over 15%, SanDisk skyrocketed more than 20%, and Western Digital was up 4.90%, while chip stocks strengthened, Qualcomm rose nearly 4%, and AMD increased by 2.5%. The entire storage and chip ecosystem advanced against the trend. In contrast, Apple dropped 6%, Microsoft fell 3.46%, and most of the seven major tech giants faced pressure.

In commodities, Bitcoin fell 2.10% to $59,771.9, gold rose 0.6% to reclaim $4000, and the dollar ended a six-day upward streak, down 0.15%. Oil prices rebounded, with WTI up 2.25% to $71.92, Brent rising 2.06% to $75.26.

Macro and Outlook

May PCE data was released on Thursday, showing a year-on-year increase of 4.1% in the price index, and core PCE reached a three-year high of 3.4%. After the data was released, the market experienced a brief downturn but subsequently eased in the bond market. The yield on the 2-year U.S. Treasury fell 2 basis points to 4.13%, while the 10-year remained basically flat at 4.39%, as the market digested this "relatively hot but not desperate" data.

Apple's price increase statement directly addressed the problem. Cook explicitly stated that this was a result of high storage chip costs, describing it as a "once in a century" occurrence. Micron's data center revenue last quarter was $11.5 billion, nearly 70% above expectations, which pushed up storage prices. Apple and Microsoft, as downstream consumer electronics manufacturers, are being forced to pass on costs. Microsoft indicated that storage component prices have risen over 2.5 times and are expected to double again by 2027, with Xbox's three consecutive price hikes reflecting this pressure being transmitted downstream.

This represents a shift in pricing power within the supply chain. Micron has gained strong bargaining power under favorable AI chip conditions, while traditional consumer electronics companies are forced to choose between raising prices or compressing profits. Apple chose to raise prices, and the market reacted with a 6% decline.

Chaoxiang Perspective

Thursday's market movements resemble the most straightforward textbook example of an industrial chain. The 15% rise in Micron reflects the confidence of "our products are in global shortage, and I set the price"; the 6% drop in Apple reflects the concern of "I am forced to raise prices, but the market thinks this will hurt sales." The market's judgment on this profit reassessment is clear: the upstream hardware winners have been determined, and downstream consumer electronics are losing blood.

The 3.4% hot PCE data would typically suppress tech stock valuations, but this week’s movements are being overshadowed by a stronger logic: those who hold pricing power will win. Companies like Micron, SanDisk, and Qualcomm that benefit directly from AI infrastructure are rising, while large companies like Apple and Microsoft that need to pass on costs to consumers are falling.

How long this divergence can last depends on whether downstream can digest the price increases and whether consumer demand is resilient enough. Based on Thursday's market choices, Wall Street has already placed its bets: the prosperity of AI chips > the profit defense of consumer electronics.