Gadget prices have fallen for decades. Then AI happened.

The global shortage of memory and storage chips is driving up the prices of consumer electronics, from computers to video game consoles. This trend is a result of the booming demand for artificial intelligence (AI) technology, which is consuming a large portion of the available chips. As a result, companies like Apple and Microsoft have announced price hikes on their core products to offset the rising costs of electronic components.

According to analysts, the majority of chips are now being allocated to the AI buildout and data center expansion, leaving fewer chips available for consumer devices. This imbalance in supply and demand is driving up prices across the industry. IDC analyst Nabila Popal noted that Apple’s price hikes were higher than expected, suggesting that iPhone prices may also see significant increases in the near future.

The rise in gadget prices marks a significant shift from the long-standing trend of declining costs in personal electronics. Government data shows that prices for computer software and accessories have surged by more than 14% in the last year, while personal computers are up by 1.3%. This increase in prices is a reflection of the current chip shortage and the growing demand for AI-related technologies.

The shortage of memory and storage chips can be attributed to the shift in focus by major chip manufacturers like Micron Technology, Samsung Electronics, and SK Hynix. These companies are now prioritizing the production of high bandwidth memory (HBM) chips for data centers, which are more profitable than traditional memory chips used in consumer devices. This shift in production has led to a scarcity of memory and storage chips for personal electronics, resulting in higher prices for consumers.

As the demand for AI technology continues to grow, the shortage of memory and storage chips is expected to persist. Companies like Apple and Microsoft are likely to continue raising prices on their products to offset the rising costs of electronic components. Analysts describe the current chip shortage as “way worse” than previous supply disruptions, emphasizing the impact of the AI boom on the consumer electronics market.