Amid criticism that it had fallen behind in the artificial intelligence (AI) era, Apple had climbed to the world's top spot in market capitalization on the strength of its financial stability—only to surrender the lead in just four trading sessions, unable to withstand the surge in memory chip prices. Once spotlighted for its stable finances amid concerns over AI overinvestment, Apple now finds itself tripped up again by the memory chip supply crunch. The memory chip industry, including Micron, is criticizing Apple for bringing the current crisis upon itself, noting that just three years ago Apple was a company that, from its position as the "dominant" buyer, spearheaded efforts to drive down costs. Cornered, Apple has appealed to the Donald Trump administration to allow it to use Chinese products such as those from ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies (YMTC), but the U.S. political establishment is balking. Going forward, Apple's earnings and stock price appear likely to hinge significantly on whether the company succeeds in expanding its memory chip supply chain into China.
Apple's 'memory supply crunch' deepens in second half...loses No. 1 market cap to Nvidia in four days
In New York trading on the 31st (local time), Apple plunged 7.35%, shrinking its market capitalization to $4.537 trillion. As a result, it ceded the world's top corporate-value spot to Nvidia, which rose 2.93% to swell its market cap to $4.8581 trillion. This came just four days after Apple reclaimed the No. 1 market cap position on the 27th for the first time in one year and three months. Apple's decline that day was all the more painful because, buoyed by Amazon's strong second-quarter results announced after the previous day's close, most Big Tech firms rose in unison—Microsoft (3.02%), Google parent Alphabet (6.73%), Broadcom (0.37%), Facebook parent Meta (3.28%), and Tesla (0.76%). Amazon, having partly proven the profitability of its AI business, soared 15.32% that day. The Nasdaq Composite also jumped 1.00%, reflecting the overall bullish mood.
Apple's steep drop stemmed from disappointment over its fiscal 2026 third-quarter (April–June) results released after the previous day's close. Apple disclosed that third-quarter revenue rose 16.4% from the same period a year earlier to $109.42 billion (about 156 trillion won). This was a record high for any April–June quarter. It also exceeded the market forecast of $108.605 billion compiled by market research firm London Stock Exchange Group (LSEG).
By segment, revenue from the core iPhone business rose 21.7% year-on-year to $54.25 billion, while Mac computer revenue, aided by strong sales of the low-priced "MacBook Neo" laptop, surged 28.7% to $10.35 billion. The wearables, home, and accessories segment, which includes the Apple Watch, posted $7.88 billion, and the iPad segment recorded $6.19 billion. Services revenue also increased 12.1% year-on-year to $30.739 billion.
Operating profit rose 26.6% from a year earlier to $35.7 billion, and net income climbed 27.1% to $29.79 billion. Earnings per share (EPS) of $2.02 topped Wall Street's expectation of $1.89. Despite the surge in memory chip prices, Apple's quarterly gross margin also reached 50.1%, up 3.6 percentage points from a year earlier, thanks to the inflow of reciprocal tariff refunds. Apple also cited capital expenditure (CAPEX) of $6.8 billion (about 9.7 trillion won) for the first through third quarters of fiscal 2026, a figure far below the hundreds of billions of dollars spent by other Big Tech firms.
Tim Cook, the CEO who succeeded the late former CEO Steve Jobs and led Apple for 15 years starting in 2011, delivered a farewell at his 90th and final earnings call. Starting September 1, John Ternus, senior vice president of engineering and a former hardware engineer, will lead Apple. Cook will step back from front-line management to become chairman of the board's executive committee. Cook said, "The succession process is going smoothly," adding, "SVP Ternus is truly a one-of-a-kind individual, and there is no one better to take the helm of the company." He emphasized, "I think there is a tremendous opportunity for Apple to move forward in AI," stressing that "the ability to handle some of a user's AI calls directly on the device is a kind of competitive advantage." Ternus, at the same event, was also optimistic, saying, "I want to emphasize that a huge opportunity is opening up for us as the market changes," and "We are focused on our plans and have high expectations."
Actively discussing use of Chinese products such as CXMT and YMTC...signals price hikes for iPhones and other products
Cook also said, "We are proceeding with plans to address the cost issues arising from providing enhanced voice assistant service features," hinting that Apple could charge fees to heavy users of the "Siri" feature. This was the first time Apple confirmed it might charge for the Siri voice assistant. Earlier, at its annual developer conference held in the U.S. in June, Apple unveiled a Siri service with significantly improved AI features. The new Siri, which began a trial service this month, is expected to be fully embedded in the new iPhone due out around September. Cook also said Apple would upgrade the performance of its paid cloud service "iCloud+," and that a subscription would be required to use the "home security" feature to be built into the next operating system, iOS.
The problem was the second-half outlook. Apple forecast that its fourth-quarter (July–September) results would be negatively affected by currency fluctuations and supply constraints for items such as memory chips. It projected fourth-quarter revenue growth of just 9–11% year-on-year, below the 16–17% of the third quarter. Apple expected even iPhone revenue growth to remain in the mid-10% range. At the earnings call, Apple CFO Kevan Parekh said, "We expect currency fluctuations to have a negative impact of about 2.5 percentage points on the company's overall growth rate," adding, "Supply constraints will also affect iPhone, Mac, and iPad."
Cook, too, told CNBC, "It's a tough situation, and it's not good for consumers either," saying, "Memory chip prices are suffocating, so we'll have to look for alternatives." This signaled the possibility of further price hikes. Apple had already raised prices on products such as Macs and iPads once on June 25.
According to Bloomberg on July 1, Apple has even entered chip-purchase negotiations with two Chinese memory chip makers—CXMT and YMTC—that were recently placed on the U.S. Defense Department blacklist. Both are companies on the "1260H List," designated by the U.S. Defense Department (Department of War) as firms supporting China's People's Liberation Army. Currently, Apple relies solely on memory chips from Samsung Electronics, SK hynix, and Micron, and is being dragged along by them in price negotiations. The plan is to diversify sourcing into China, increasing the number of memory chip suppliers from the current three to five.
According to Bloomberg, Cook recently directly asked Trump administration officials, including U.S. Treasury Secretary Scott Bessent, to ease the potential political fallout from such deals. Although the government cannot openly block Apple, a private company, from buying Chinese chips, invisible political barriers clearly exist. The Wall Street Journal (WSJ) also reported on the 24th that Cook and senior Apple executives had asked President Trump, Commerce Secretary Howard Lutnick, and Secretary Bessent to allow the use of Chinese memory chips.
Micron: "You pressured us on prices—now you reap what you sow"...U.S. Senate also demands pledge not to use Chinese memory
Apple's logic—that bringing in Chinese products would ease pressure on the global memory chip supply and lower the prices U.S. consumers must pay—has greatly rattled the industry and political circles. In particular, DRAM maker Micron, which struggled under Apple's high-handedness until just a few years ago, is fiercely resisting. Micron CEO Sanjay Mehrotra is known to have deeply disliked Apple for its price pressure ever since his time as a co-founder at SanDisk, to the point that company officials rarely even met with them.
Mehrotra, appearing on CNBC's flagship program "Mad Money" on June 30, said, "In recent years, some [BODY]
customers pressured them to lower memory chip prices excessively," he said, criticizing that "as a result, the industry failed to invest sufficiently in preparation for the AI era." CEO Mehrotra went on to point out that "in 2023, memory chip prices fell to about one-third of their previous levels," and that "companies were unable to make money, which greatly weakened their ability to invest in new production facilities." Wall Street interpreted the "some customers" mentioned here as including Apple.
In fact, Micron endured a severe downturn amid slowing demand for PCs and smartphones, with its gross profit margin for fiscal 2023 (September 2022 to August 2023) plunging to -7.3%. As DRAM and NAND flash prices plummeted, Samsung Electronics and SK hynix also went through an unprecedented cold spell. Micron's capital expenditures also fell 36%, from $12.1 billion in fiscal 2022 to $7.7 billion in fiscal 2023. CEO Mehrotra said, "It takes several years to build a new chip plant, and the manufacturing processes for next-generation memory chips have become far more complex than before," predicting that the memory chip supply shortage—centered on high-bandwidth memory (HBM) for AI servers—would continue beyond next year.
According to the WSJ on the 24th, Micron executives, including CEO Mehrotra, urged Secretary Lutnick and other administration officials not to allow Chinese firms such as ChangXin Memory to supply major U.S. technology companies like Apple. They argued that if Apple's demands were permitted, China could destroy the U.S. memory chip industry just as it did the steel and manufacturing industries. Micron emphasized that this risk would remain the same even if Chinese-made memory chips were used only in Apple products sold outside the United States.
According to Bloomberg on the 29th, U.S. senators from both parties—including Republican Senator Jim Banks and Democratic Senate Majority Leader Chuck Schumer—also sent a letter to CEO Cook that day urging Apple not to use products from ChangXin Memory and Yangtze Memory. They said, "The world's largest consumer electronics company could become dependent on key components from a company designated by the U.S. government as a Chinese military firm," and demanded that Apple "pledge by August 21 not to use ChangXin Memory or Yangtze Memory chips in its products." The lawmakers also dismissed Apple's strategy as "shortsighted," expressing concern that "once Chinese components pass Apple's production quality certification, a single procurement decision could expand their use to products worldwide."
Trump, facing midterms, agonizes between 'curbing prices' and a 'domestic-centered supply chain'... windfall from overinvestment argument also halved
The U.S. senators further highlighted that Apple's use of Chinese-made memory chips could spread to technology companies in other countries, disrupting efforts to build a U.S.-centered supply chain. They also urged Apple to disclose what technical information it provided to ChangXin Memory during the component certification process without a permit from the U.S. Commerce Department. Michael Kratsios, director of the White House Office of Science and Technology Policy, also recently told federal lawmakers, "The most important thing is that we must build production capacity here," adding, "We don't want to do business with anyone on the 'Entity List.'" The Entity List is a trade blacklist administered by the Commerce Department's Bureau of Industry and Security (BIS), separate from the Defense Department's 1260H List. Among Chinese firms, Yangtze Memory is on the list.
As Apple and Micron—two companies symbolizing U.S. technological hegemony—clash over the memory chip supply shortage, President Trump's dilemma over which side to support has grown. Leaving memory chip price increases unchecked risks driving up not only the prices of Apple's products but also various other prices ahead of the November 3 midterm elections. Recently, even the Federal Reserve has cited the surge in AI investment—ahead of tariffs or Middle East energy price increases—as a major risk factor for long-term inflation. Apple, too, has pointed to Micron's current gross profit margin of over 80% as evidence of price gouging.
Yet it is also not easy to freely permit imports of Chinese-made memory chips, as doing so could damage one of the few areas where domestic manufacturing remains competitive. Since the beginning of this year, Secretary Lutnick and U.S. Trade Representative Jamieson Greer have dutifully attended and encouraged Micron's U.S. expansion events.
The lobbying capabilities of both Apple and Micron are also evenly matched. Apple has maintained friendly relations with President Trump since his first term. Then, early in his second term last year, it clashed with him over having production bases in other countries such as India. When CEO Cook did not accompany Trump on his three-nation Middle East tour from May 13 to 16 last year, Trump criticized him several times and, on the 23rd of the same month, threatened to impose a 25% tariff on Apple iPhones produced overseas, including in India. CEO Cook ultimately pledged at the White House on August 6 last year to make $100 billion (about 145 trillion won) in U.S. investments over four years. Cook even presented Trump with a commemorative plaque mounted on a 24K pure gold base, securing tariff exemptions for Apple products manufactured in China and elsewhere.
Micron also recently announced it would invest $250 million (about 365 billion won) as a matching fund for federal support in the so-called "Trump savings account." Both Cook and Mehrotra accompanied President Trump on his state visit to China this May and donated funds toward the construction of a new White House ballroom. According to the WSJ on the 24th, Secretary Lutnick, who is leading discussions over Apple's request to allow Chinese memory chip supply, holds regular conversations with both Cook and Mehrotra. White House Deputy Press Secretary Kush Desai told the WSJ regarding the issue, "We will pursue investment and economic relief for the American people while protecting our national security."
If Apple's attempt to use Chinese-made chips amid the memory shortage is ultimately thwarted by political opposition, the company's second-half results are expected to be significantly shaken. Of course, since smaller smartphone makers face even more severe memory chip shortages, Apple could increase its market share—but the assessment of the financial strength that carried it to the top market capitalization in the era of massive AI investment could inevitably weaken. Moreover, analysts say that with Amazon and Microsoft demonstrating this earnings season the possibility of converting AI investments into cloud revenue to some extent, the windfall Apple gained from arguments about overinvestment could also be halved.
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