What the desk is arguing
The desk argues that the AI-driven memory shortage is not just a tech issue but has significant implications for the FX market as it influences inflation trends. Per J.P. Morgan's full note, the projected 400% price rise in dynamic random access memory (DRAM) over the next few years marks a critical point where rising costs will inevitably affect consumer prices broadly.
With Institutional Estimates showing a dramatic 23% increase in indices such as the Consumer Price Index (CPI) for software and accessories since late 2024, the expected ripple effect on consumer electronics will be substantial, further squeezing disposable income and consumer spending.
Where it sits in our coverage
As per our consensus, we remain aligned with a target of 1.075 for the FX movement, with range estimates from 1.04 to 1.12. Notably, jpmorgan targets 1.10 by March 2026, while bofa holds a contrary view with a lower target of 1.04 in the same tenor.
Our call aligns closely with the upper end of the range set by jpmorgan, reflecting an optimistic view on FX resilience against inflation pressures driven by chip shortages and AI demands.
How other firms see it
In this context, jpmorgan and citi share an outlook that the ongoing technological shifts will likely support currency stability amidst inflation concerns. Conversely, bofa suggests that bearish trends due to other economic factors may outweigh these influences in the short term.
Keep an eye on the USD/JPY dynamics as tensions around inflationary pressures could lead to volatility, reflecting broader market sentiment around technology and consumer goods pricing strategies.