Chip Crisis Sends Consumer Tech Prices Soaring

0:00Luke Vargas:Model portfolios have evolved from a one-size-fits-all solution. In a recent roundtable conversation, Jeffrey Saif of BlackRock and Alessio DeLongis of Invesco break down what's driving the next model moment, discussing how a deeper level of customization is producing a better alignment with investor goals and creating a practice differentiator for financial advisors.

0:26Luke Vargas:Get ready for pricier electronics as a memory chip shortage squeezes consumer tech. Plus, another week, another partial government shutdown with no immediate end in sight. And we'll dig into the strangest American winter in years.

0:41Tim Martin:We have extreme cold on the eastern U.S., but then in the western U.S., we are dealing with record-breaking temperatures in many instances. We pulled readers, and 52 % so far have said this winner is worse than they remember.

0:55Luke Vargas:It's Tuesday, February 17th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today.

1:10Luke Vargas:A growing and acute shortage of memory chips is squeezing the makers of phones, laptops, and game consoles, sending consumer tech prices skyrocketing. With AI demand gobbling up high-end semiconductors, our Korea Bureau Chief Tim Martin said that non-AI buyers are having to choose between raising prices, trimming margins, or reducing device memory.

1:31Tim Martin:So we've seen PC makers like Dell raise prices for some commercial laptops by as much as 30 percent. Acer, for some of their budget computers, have reduced the amount of memory that come in certain models. And with Xiaomi, a Chinese smartphone company, they got rid of the lower memory option for certain lines of phones. So you can only get the higher memory options, which allow them to protect their margins.

1:59Luke Vargas:And Tim told us that even some of the bigger tech companies won't be immune to the memory shortage.

2:03Tim Martin:Some of the biggest names in tech, your Apples, your Samsungs, your Nintendos, they have ability to buy in advance in bulk before some of these price hikes really take off. But those stockpiles only last so long. So at some point, they'll be back in the market buying memory at these astronomical prices. I mean, we've never seen price rises like this so quickly. We've seen a sevenfold increase for the major types of memory just in the past 12 months or so. Things have never skyrocketed like this before. And this is posing a new problem to companies.

2:37Luke Vargas:Tim said that the current chip crunch does have parallels to pandemic era shortages, but is likely to be more severe and longer lasting.

2:44Tim Martin:We're unlikely to see any type of slowdown in these prices for years. And this creates not just a short-term headache for these tech hardware companies, but sort of almost like an existential evolution that they'll have to think, how do we now compete against this new category of AI to get the really essential components we need? And these skyrocketing prices for the basic components for these products are translating into forecasts for lower sales. Because their products are becoming more expensive, people are buying fewer of them, which means they have less margin or more pressure on their balance sheets.

3:23Tim Martin:This is a new type of threat to the supply chain that companies are really scrambling to try and figure out.

3:28Luke Vargas:The heart of the issue is chip manufacturing, with new factories or fabs being built, but just not quickly enough. U.S. memory chipmaker Micron is rushing to add capacity. It's spending$200 billion on factories in Idaho, New York, and Japan that'll open in 2028. Meanwhile, NVIDIA supplier SK Hynix is also building new fabs in Indiana and South Korea, with two new factories opening this year. The U.S. government is emerging from the holiday weekend partially shut down. And partially here means just the Department of Homeland Security. Its immigration enforcement personnel are still working and getting paid, but not so for the TSA.

4:11Luke Vargas:Staffers at the nation's airports can still log hours, but likely won't be compensated for that until after the shutdown is resolved. And with the House and Senate on break this week, that could be a little while. Lawmakers remain at odds over the terms of a DHS funding package, with Democrats mandating that ICE and CBP agents don body cameras, unmask, wear visible identification, and need warrants signed by a judge in order to enter homes. On CBS's Face the Nation, Democratic House Minority Leader Hakeem Jeffries and White House Border Czar Tom Homan squared off on those proposals. Police officers don't use masks.

4:49Luke Vargas:County sheriffs don't use masks. state troopers don't use masks. Why is it that ICE agents who are untrained are being unleashed on American communities with this type of lawlessness, violence, and brutality? They are wearing badges, they're wearing placards to identify what agency they're from. But their name isn't on it, right? I don't know of another law enforcement agency in the country that has an 8 ,000 % increase in threats. That figure Homan cited is from a DHS press release last month. Just two months after taking up the job, New York City Mayor Zoran Mamdani is facing his biggest test to date.

5:29Luke Vargas:Today, he must present a balanced budget for the coming fiscal year, which kicks off months of wrangling with the city council. And with a predicted budget shortfall of up to$12 billion over the next two years, Journal reporter James Fanelli says it's a significant challenge for a mayor who vowed not to cut social programs. The mayor came into office on a very ambitious affordability agenda. And some of his biggest promises were to build more affordable housing and to expand universal child care and to create a free city bus service. But all those things come with big price tags. But there has been a bright spot already.

6:11Luke Vargas:His administration has been able to find savings. They are projecting higher tax revenue from Wall Street bonuses, higher than they previously thought. So they think that they'll be able to shrink that budget deficit from$12 billion down to$7 billion. And more importantly, the mayor is seeking to get state lawmakers to approve some tax increases. One, he wants to tax millionaires at a higher rate, and two, he wants to increase the tax rate on corporations. The city covers more than two-thirds of its budget from tax revenue and relies on state and federal funding for the rest. And civil rights leader Reverend Jesse Jackson died this morning at the age of 84.

6:56Luke Vargas:A gifted public speaker, Jackson was known for fiery rhetoric, often advocating for the interests of working people and especially minorities. Jackson twice sought the Democratic nomination for president becoming the first Black man to wage a nationwide campaign for a major party's endorsement. Coming up, Goldman Sachs follows other Wall Street giants in scrapping DEI criteria for its board. And it's not just you. This winter is worse and weirder than usual. We'll tell you why after the break.

7:30Luke Vargas:Outsystems is an outstanding way to quickly deploy apps and AI agents and deliver results. A top U.S. bank deployed apps for customers to open new accounts, while a global brewer developed an app to automate tasks worldwide. OutSystems, build your agentic future.

7:48Luke Vargas:Hotelier Thomas Pritzker is retiring as the executive chairman of Hyatt after recently released documents detail his ties to convicted sex offender Jeffrey Epstein. Pritzker is a member of one of Chicago's most prominent families, which includes Illinois' current governor and a former U.S. Commerce Secretary. In a statement, Pritzker said he exercised terrible judgment in maintaining contact with Epstein and Ghislaine Maxwell, and in a memo to the board added that his departure would allow for a proper handoff at Hyatt. The company has named its president and chief executive as board chair. Meanwhile, Wall Street's DEI retreat is continuing, with Goldman Sachs saying it will no longer consider race, sexual orientation, and other diversity factors when screening potential board candidates.

8:35Luke Vargas:We exclusively report that the decision follows a behind-the-scenes request from a conservative activist nonprofit that owns a small stake in the bank, urging it to drop the DEI policy and requesting the proposal be circulated to shareholders. Goldman's board is expected to finalize the DEI walkback this month. And we've learned that activist Elliott Investment Management has built a more than 10 % stake in Norwegian Cruise Line and is planning to push for changes at the world's fourth largest cruise operator. Its shares are among the worst performing in the S &P 500 over the past five years, with its stock remaining near COVID-era levels despite the recovery in travel demand.

9:16Luke Vargas:And between extreme temperatures, record snowfall and surging energy use, if it feels like this winter has been an especially tough one, you're not wrong.

9:26Tim Martin:This winter is what many meteorologists have been calling a cool east, warm west pattern. Essentially, we have two different winters going on. Reporter Carl Churchill covers climate for

9:38Luke Vargas:the journal.

9:39Tim Martin:We have an abundance of snowfall out east, but an unusual lack of snow out west. Many Americans on the east coast have not experienced a winter quite like this in a long time. We have seen record high housing heating costs. Much of this extreme cold has headed very far south where homes and infrastructure are not built to handle extreme cold. And especially what we saw in January this year was a large amount of what is called ice glaze accumulation, and that can lead not only to widespread damage to vegetation, but also cause power outages. On the bright side, many people on the East Coast are getting to experience an abundance of snow that they haven't seen in quite a long time, especially East Coast ski resorts.

10:27Luke Vargas:Well, whether you're thrilled about hitting the slopes, frustrated about your soaring heating bill or just fed up with slipping on the ice, let us know. We left a link in our show notes. And that's it for What's News for this Tuesday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer is Sandra Killhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

10:57Luke Vargas:model portfolios are no longer one size fits all in fact 85 percent of investors want financial advisors to deliver models customized to their individual goals investment preferences and tax circumstances discover some of the top themes driving the shift in seizing the next model moment by blackrock