Top strategist thinks the Federal Reserve interest rate hike won't fix this huge earnings risk

Barclays strategist Venu Krishna warned that the Fed's first interest rate hike since 2023 won't address the main earnings risk stemming from explosive memory chip price inflation driven by the AI boom. Krishna's analysis points to rapidly expanding compute needs as demand for training and inference scales, requiring more memory chips from an already limited supply.

Recent reports indicate memory cost concerns are beginning to impact 2027 projections, with companies like Apple, HP Inc., and Samsung noting increased memory and storage costs. The memory chip market has tightened as HBM and advanced DRAM used in AI servers outpace supply. Major suppliers, including SK Hynix, Samsung Electronics, and Micron, have sold most of their premium AI memory capacity through 2026 to customers like Nvidia, Microsoft, Amazon, and Meta, all racing to build AI infrastructure.

This shortage has led to sharply higher memory prices and increased pricing power for suppliers after years of weak industry conditions. While experts expect supply constraints to persist into 2027, creating favorable conditions for industry leaders, it will also likely result in higher-than-expected costs for businesses relying on these memory-intensive chips.