Apple price hikes, inflation, and AI bubble concerns (with Abeer Abu Omar)

Robert Lee attributes Apple's 6% drop to price hikes from memory chip shortages, but notes the broader context of rising US inflation (PCE at 4.1%) driving dollar strength and negative risk sentiment for tech. He contrasts Micron's benefit from the shortage with questions about its sustainability, given the cyclical nature of the memory chip sector. On the AI bubble, he argues that while infrastructure providers like Nvidia profit, the return on investment for AI users remains unclear, citing extreme stock performance of companies like Dupeau AI that lose money.

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Apple price hikes, inflation, and AI bubble concerns (with Abeer Abu Omar)

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The PCE increase will likely drive a continued rally in the US dollar in theory.

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Rising inflation and dollar strength are negative for tech sentiment. Apple's price hikes and questions about AI sustainability add to caution.

Asks if the drop in Apple's stock is solely due to price increases and if more contagion is expected.

Abeer Abu Omar
Robert Lee

Apple's price hike is one factor, but the broader context is US PCE inflation at 4.1%, up from 3.8%, which will drive a continued rally in the US dollar and is negative for risk sentiment, particularly in tech. Apple's price hikes raise questions about how they feed into inflation data.

The core focus for markets is inflation and the dollar, which is negative for tech.
Asks about the divergence between Apple's 6% drop and Micron's strong results.

Abeer Abu Omar
Robert Lee

Micron benefits from the supply shortage, but the question is sustainability. The memory chip sector is cyclical and commodity-like; tight supply doesn't normally last as new supply comes on. SK Hynix still trades at mid-single-digit P/E, indicating ongoing questions about the sustainability of the upcycle.

The sector is notoriously volatile and cyclical. The lack of a rerating in multiples despite strong stock performance tells you a lot.
Asks how concerned investors should be about an AI bubble.

Abeer Abu Omar
Robert Lee

Stock price performance has been incredibly strong, positioning at extreme levels, and valuations stretched. While infrastructure names like Nvidia make money, the return on investment for AI users remains unclear. The sustainable bottom-line return for AI users has yet to be demonstrated, which is why bubble questions persist.

Cites Dupeau AI, up 20 times this year but set to lose close to $800 million at the operating level.

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