Apple's Price Hikes Just Breathed New Life Into The Memory Stock Trade

• Apple CEO Tim Cook said price hike are "unavoidable."
• The company is responding to soaring costs for memory chips.
• SanDisk and Micron surged as Cook's comments confirm the supply shortage isn't letting up.

Memory stocks are getting a fresh boost on Thursday after an update from Apple.

The tech giant sparked new momentum for one of the hottest trades of the year after outgoing CEO Tim Cook hinted that the supply crunch at the heart of this year's memory stock rally is still a major issue for hardware makers.

"Unfortunately, price increases are unavoidable," Cook told The Wall Street Journal. "We're doing our best to mitigate the huge increases that are being passed to us, and we've been trying to shield our customers from the increases, but the situation has become unsustainable."

The market's leading memory chip stocks surged on Thursday morning following Cook's announcement.

• SanDisk Corporation: +10%
• Micron Technology: +7%
• Western Digital: +7%
• SK Hynix: +6%
• Samsung Electronics: +4.5%

The group surged surged significantly in May as demand from AI companies catapulted them to the top of Wall Street's radar. With supply struggling to keep up with demand, both retail and institutional investors have rushed to pile into the red hot trade as US names like Micron and SanDisk surged to records, and Korean chip makers Samsung and SK Hynix topped a $1 trillion market cap for the first time.

Cook's statement drives home the reality that the memory chip shortage that's boosted these stocks remains an issue, with demand still expected to outpace supply for some time.

As Dan Ives of Wedbush Securities noted, Apple's price increases would be coming at a critical time, and he predicts that consumers can expect higher costs in September when the new iPhone 18 lineup is rolled out.

"With memory (DRAM) and storage (NAND) prices skyrocketing with no end in sight, these have been issues addressed by Apple on recent earnings calls with these component price increases offset by carry-in inventory that have supported gross margins over past quarters," he wrote in a note to investors.

Gene Munster, managing partner at Deepwater Asset Management, responded to Cook's statements by highlighting that the memory stock trade is still strong.

"This price hike conversation is definitely driving the chip stocks higher. The fact that Tim Cook has been pushed to move the pricing higher is a signal that it's that big of an issue," Munster said on CNBC on Thursday morning.

Other finance pros added that Apple may be only the first among other hardware device makers to increase prices in order to offset surging memory costs.

"We've already seen expectations for year-over-year declines in smartphone, PC and related consumer electronic devices shipments, but depending on where some of these price increases land, additional downward revisions are possible," said Chris Versace, senior portfolio manager at TheStreetPro.