The AI spending spree of big tech companies has reached unprecedented levels, with total investment exceeding a trillion dollars since 2023. This has resulted in a ferocious competition for chips, which is having a significant impact on Apple's ability to obtain the computer processes it needs. Apple's CEO, Tim Cook, has described the memory chip crisis as a '100-year flood', highlighting the severity of the situation. The iPhone sales are up 22%, and the company is working on new products, including a foldable iPhone and smart glasses.
However, the competition for memory chips is getting stronger, and Apple may have to raise the price of its iPhone in the autumn. The company's new CEO, John Turnis, has a big job ahead of him, with new products coming out and a need to replace senior leadership team members who are nearing retirement age. The talent drain at Apple is also a concern, with many employees leaving the company. Other big tech companies, like Amazon, are also investing heavily in AI. Amazon's cash flow has turned negative due to the high spending, but the company is confident that it will pay off in the end.
The market is also watching the Bank of Japan, which has held its interest rates steady. But the yen is still weak, and the Japanese government is trying to prop it up. The Bank of Japan has acknowledged that inflation could overshoot its 2% target, and some policymakers are calling for a rate hike. The US government is also getting involved, with the Treasury Secretary calling for the Bank of Japan to hike rates. The Japanese government has intervened in the currency market to try and prop up the yen, but it's not clear if this will be enough.
The market is waiting to see what will happen next, and the Bank of Japan is under pressure to take action. The Bank of Japan has also acknowledged that the yen is undervalued, and the US Treasury Secretary has expressed support for the Japanese government's intervention. The situation is complex, and the outcome is uncertain. But one thing is clear: the AI spending spree of big tech companies is having a significant impact on the global economy, and the competition for chips is just one aspect of this larger trend.
