By Emily Bary
Just how well can Apple insulate itself from booming memory prices?
Apple locks in memory prices for iPhone components via long-term contracts, but one analyst notes it's uncertain how long those last or what will happen when the current arrangements lapse.
What's been good for Micron Technology and its fellow memory suppliers isn't necessarily great for the rest of the technology world.
As chipmakers like Nvidia (NVDA) seek out more high-bandwidth memory for their AI hardware, that's driven up memory prices at companies like Micron (MU), which are scrambling to meet demand. And that in turn means ripple effects across the technology ecosystem, including potentially higher costs for consumer-electronics manufacturers that rely on memory chips to store and access data.
For Apple (AAPL), memory is what everyone is watching in the near term, according to Seaport Research analyst Jay Goldberg. Memory costs have the potential to impact gross margins as well as the decisions Apple makes in terms of how to price its own products.
See more: The memory boom has been great for Micron - but could hurt these other tech stocks
The company has long-term memory contracts, which can help insulate it from volatile pricing dynamics and reflect a push to lock prices in when cycles are favorable. But it's not exactly clear how long those contracts last.
Conventional wisdom would suggest that Apple is going to get pinched on memory costs at some point down the line, Goldberg told MarketWatch. But maybe not, he noted, if the company is able to get more favorable pricing than its competitors.
In short, memory is &#34;possibly good, possibly bad,&#34; he said, but nonetheless a key factor investors need to monitor heading into the new year.
Don't miss: Micron just had its Nvidia moment. What comes next for the stock?
For its part, Apple has shrugged off memory concerns. &#34;On the commodity side, I would say we're seeing a slight tailwind on memory,&#34; CFO Kevan Parekh said on the company's last earnings call in late October. He noted that Apple exceeded the high bound of its guidance as it delivered a 47.2% gross margin last quarter. The midpoint of the current guidance range is 47.5%, which implies expansion potential ahead.
Jefferies analyst Edison Lee wrote earlier this month that Apple was &#34;highly resilient to memory cost hikes,&#34; and it &#34;could benefit from pulled-in consumer demand&#34; in the coming quarters, as shoppers seem worried that prices could rise with the next iPhone model despite a dearth of meaningful feature improvements.
Apple likely has already locked in much of its memory supply for the current product cycle, according to Bernstein analysts, who said the company &#34;only has 10% of its iPhone volume...facing these increased prices.&#34; That means the memory issue could be just a 0.3% drag on earnings per share, versus a 4% drag if the company didn't have long-term agreements, the analysts estimated.
&#34;For the next iPhone 18 cycle, memory prices will be renegotiated and we expect other costs and prices will be managed to have negligible impact on longer-term earnings,&#34; the analysts wrote in a November report.
See also: Can Apple's stock make a true rebound? It might be harder than you think. Here's why.
AI is the other big issue on investors' minds heading into 2026. Investors &#34;really want to know what their AI strategy is,&#34; Goldberg noted.
The company has made a series of missteps with AI, teasing features before they were ready for primetime and rolling out new functions more slowly than peers. Apple has brought in a Google veteran to lead various AI initiatives, suggesting it's looking for a shakeup. But Goldberg wonders if an outsider will be able to forge the necessary relationships in a company known for its &#34;really strong internal culture.&#34;
Unlike other Big Tech companies, Apple has been disciplined with AI spending. Apple is known for &#34;steering away from capital-intensive kinds of product development within artificial intelligence and essentially saying, may the best product win and we're going to collect the toll on the other side of it if you want to access our iOS users,'&#34; said Matt Stucky, the chief portfolio manager for equities at Northwestern Mutual Wealth Management.
He doubts the company will spend heavily to build its own large language model, as it will more likely opt for a strategic partner, namely Google.
More from MarketWatch: A bullish indicator for Alphabet's stock just flashed in the prediction markets
&#34;That's probably maximizing their market-dominant position from a capital-efficiency perspective,&#34; Stucky said. But in that case, investors may be left wondering what the next leg of growth is.
The shares trade at about 30 times forward earnings he noted, a &#34;pretty high level&#34; for a company with Apple's growth profile. The company increased revenue by just over 6% for the fiscal year that ended in September.
Apple investors will be looking for a stronger showing next year, with shares up only 9.3% in 2025, with just two trading days left in the year. That's the second-worst performance among the &#34;Magnificent Seven&#34; players and significantly below the S&amp;P 500 index's SPX 17.4% gain in the year to date.
-Emily Bary
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
12-30-25 0805ET

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<p>Apple investors should closely monitor memory prices as they could impact gross margins and product pricing. While Apple has long-term contracts to mitigate volatility, uncertainty remains about their duration. Analysts suggest that Apple is resilient to memory cost hikes, with only a small portion of its iPhone volume exposed to increased prices. Additionally, investors are keen on Apple's AI strategy, as the company has been cautious with AI spending and may seek strategic partnerships rather than developing its own models. Overall, memory costs and AI developments are key factors for investors in the upcoming year.</p>

- Apple's long-term memory contracts may mitigate the impact of rising memory prices on its gross margins, but uncertainty remains regarding the duration of these agreements.  
- Analysts suggest that while Apple has largely insulated itself from current memory cost increases, the renegotiation of prices for the next iPhone cycle could affect earnings if not managed well.  
- Additionally, concerns about Apple's AI strategy and performance could shape investor sentiment, as the company seeks to balance technological advancements with capital efficiency.

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