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ZDNET's key takeaways

• Memory and SSD costs could rise 130% by 2026, driving PC prices up.
• Surface prices surged as much as 69% in recent months due to those costs. 
• Rising component prices may shrink PC demand, especially entry-level options.

You think groceries are expensive? Wait till you hear what's happening to the cost of the memory and storage chips inside that PC you were thinking of buying later this year.

According to a recent Gartner report, the combined cost of DRAM and SSDs will increase by 130% by the end of 2026. The culprit, of course, is the insatiable demand for memory and storage from cloud providers building AI-related applications, and chip makers won't be able to catch up with demand for another year or two at least.

Also: 8GB of RAM is enough for a MacBook in 2026 - here's why

Those soaring prices are already having an effect on the PC market, and the effect on Microsoft is especially severe.

Microsoft Surface prices surge

This week, Windows Central reported that Microsoft has dramatically increased the prices of its Surface PCs. I can personally attest to those increases.

In December 2025, just four months ago, I ordered a new top-of-the-line Surface Pro from the Microsoft Store. It was configured with a Snapdragon X Elite processor, an OLED display, 32GB of RAM, and a 1TB SSD (Type Cover not included). I am using that PC to write this post.

At the time, that Surface cost a grand total of $1,822.17, including tax and a four-year Microsoft Complete warranty, with a student/military/employer discount. That seemed like a pretty good deal, but I had no idea just how good a deal it was until today, when I checked the current price of that exact same configuration. The total bill with sales tax came to $3,071.63 -- still with no Type Cover. That's a 69% price increase in only four months. Yikes.

Also: I compared virtual RAM with real RAM on my Windows PC - here's what the numbers told me

When I checked other Surface devices, I found similar price hikes. The least expensive current model I could find, the 12-inch Surface Pro with 16GB of RAM and a 256GB SSD, now starts at $1,050.00, with $50 off if you buy it at Amazon. When it launched nine months ago, you could find it on sale for $729.

That's a 37% price increase, for those keeping score.

A Microsoft spokesperson confirmed that surging prices in its supply chain are to blame: "Due to recent increases in memory and component costs, Surface is updating pricing on Microsoft.com for its current-generation hardware portfolio," they said in an emailed statement. "We remain committed to delivering value to customers and partners while upholding our standards for quality and innovation."

The struggling PC market

Even before the price increases, the Surface line was struggling. As I wrote a little over two years ago, "The PC market is going through a major correction right now, and Surface is doing even worse than its rivals." It's unlikely things have gotten better since then. Microsoft doesn't break out its PC sales and shipments, but Gartner's report on worldwide PC shipments for Q1, released this week, offers some clues.

Year over year, PC shipments were up 4%, but that number was "artificially inflated [and] not due to genuine demand," according to Gartner Research Principal Rishi Padhi. The real cause was vendors and channel distributors building up inventory levels ahead of expected price hikes in Q2. Those price hikes were, of course, "driven by rapidly rising memory price inflation (memflation), as well as DRAM and NAND flash component costs. This is especially true for lower-margin products."

Also: The MacBook Neo just upended the budget laptop market

In that environment, Dell and Lenovo increased sales year over year, while HP shipments were down. Microsoft wasn't even in the top six suppliers worldwide, instead being grouped into "Others." And that group saw shipments decline by 4.6%.

Meanwhile, Apple shipments for the quarter were up 12.7% worldwide, Gartner estimated, "primarily driven by robust demand for the MacBook Neo." More on that in a minute.

Gartner predicts that the average PC price will increase by 17% by the end of 2026, and that will translate into dramatically lower shipments, as businesses and consumers hang on to existing devices for longer.

"This sharp increase removes vendors' ability to absorb costs, making low-margin entry-level laptops nonviable," said Gartner senior analyst Ranjit Atwal. "Ultimately, we expect the sub-$500 entry-level PC segment will disappear by 2028. In addition, rising AI PC prices will delay the projected 50% market penetration of AI PCs until 2028."

That last part is especially bad news for Microsoft, which has hitched its wagon to the AI PC market with its Copilot+ PCs. Ironically, its own spending on cloud-powered AI services is helping to stall the market for the client devices needed to take advantage of those services.

What makes the MacBook Neo different?

If crushing increases in component costs are killing the cheap PC market, why was Apple able to succeed with its low-cost $599 MacBook Neo? Maybe it's because they don't have to buy memory on the open market.

The MacBook Neo is based on Apple's A18 Pro SoC, which includes 8GB of RAM as part of a single package (unified memory), just like in the iPhone 16 Pro it was originally designed for. That's why there is no memory upgrade option for the Neo. As WCCF Tech reports:

Apple's A18 Pro from 2024 utilizes TSMC's InFO-POP (Integrated Fan-Out Package on Package) technology, meaning that the DRAM sits on top of the die as part of the silicon. The technology giant re-purposed the same SoC and incorporated it into the MacBook Neo, which is why the latter is limited to 8GB of RAM.

That chip is more than adequate for powering basic tasks on a Mac, and it can run rings around entry-level PC processors at the same price point.

Meanwhile, PC OEMs trying to compete at the low end, where they have always had a price advantage, don't have that option available. Qualcomm, Intel, and AMD don't have any SoCs with integrated memory that can be turned into a lightweight PC, and even if they could, 8GB isn't enough to handle the workloads that Microsoft demands of Windows 11.

Also: Why buying DDR4 RAM is now a smarter play than DDR5

In theory, Apple can keep this up for a few more years. The A19 Pro has 12GB of RAM on board and could probably power a MacBook Neo 2 next year, while Windows PC makers will have serious problems producing competitive designs under $1000, at least not as long as those AI data centers continue their seemingly insatiable demand.

The biggest problem for Apple is that the MacBook Neo might be too successful. A well-sourced report says the device was designed around "chips that would otherwise have been scrapped — remember, Apple are the masters at recycling! But with MacBook Neo being insanely popular, the stock of those binned chips will run out before demand gets satisfied."

Another report this week from MacRumors sums up the dilemma, "Apple's initial plan was to have suppliers build around five to six million MacBook Neo units before ceasing production of the model with the A18 Pro chip, he said, but it sounds like demand is so strong that Apple might run out of A18 Pro chips to put in the MacBook Neo before the second-generation MacBook Neo with an A19 Pro chip is ready next year."

That's a good problem, relative to the chaos that PC makers are facing thanks to the overheated component market.

Gartner predicts that worldwide PC shipments will contract by more than 10% in 2026. But that total includes Macs, Windows PCs, and Chromebooks. I won't be surprised to see an even steeper drop-off for Windows PCs. And anyone who works in the Surface division at Microsoft should feel especially nervous.