Qualcomm stock sinks 10% as company issues dire warning on memory shortage

Qualcomm's shares took a significant hit, dropping 10% following the company's alarming forecast regarding the ongoing memory shortage. The surge in demand for artificial intelligence data centers has severely impacted the availability of memory chips for consumer electronics. During a recent earnings call, Qualcomm's CEO, Cristiano Amon, emphasized that the current challenges are "100% related to memory." The supply of dynamic random access memory, essential for smartphones, computers, and wearables, has decreased compared to the previous year. Amon acknowledged that while demand for handsets is robust, the dwindling memory supply is a direct consequence of resources being diverted towards high-bandwidth memory utilized in data centers. He stated, "I think the market is going to be sized by that," indicating that customers are adjusting their production plans to align with the memory currently available. Despite exceeding fiscal first-quarter expectations, Qualcomm revised its adjusted earnings forecast, projecting between $2.45 and $2.65 per share, alongside anticipated revenue of $10.2 billion to $11 billion for the current quarter. This outlook fell short of analysts' predictions from LSEG, who had estimated $11.11 billion in sales and earnings of $2.89 per share. In a follow-up interview, Amon expressed uncertainty about whether smartphone manufacturers would raise prices, but he warned that the ongoing shortage could hinder supply chains. He noted that Qualcomm's clients are leaning towards higher-end devices, which may better absorb increases in memory costs. The effects of this memory crunch are rippling across the tech industry, with Arm also experiencing stock declines amid smartphone memory concerns. Last week, Apple highlighted its struggles to secure enough chips to satisfy the strong demand for iPhones. This imbalance between supply and demand is benefiting memory chip producers such as Micron Technology and Samsung Electronics, leading to rising prices. Qualcomm indicated that it anticipates revenue from its new AI chips and other data center products to materialize by fiscal 2027.