Apple's Incoming CEO Ternus Faces Perfect Storm of Rising Memory Chip Costs

Apple's incoming CEO John Ternus is about to face a daunting challenge. Tim Cook, who steps down on September 1, has left him with a 'mess' due to rising commodity prices.

The main culprit behind this problem is the increasing cost of memory chips, which Cook described as a '100-year flood.' This unexpected spike in prices has already forced Apple to raise prices on some products, but it may not be enough. If memory chip costs continue to rise, it could lead to further price hikes, potentially alienating Apple's consumer base.

Cook noted that the company is trying to offset these rising costs by decreasing expenses on other components. However, with Apple's stock priced for perfection at 35 times earnings, there may not be much room for maneuver. This valuation makes it seem absurd when considering that the S&P 500 trades at a lower multiple and Nvidia is growing at an impressive 85% year-over-year pace.

The situation is further complicated by Apple's reliance on memory chips in its products. With prices continuing to rise, it will be a challenging test for Ternus as he navigates the company through this perfect storm.