Amazon lost more than $25 billion on its devices business in four years, and it sold that hardware cheap on purpose. The Wall Street Journal, working from internal documents, described the logic as Gillette's: nearly give away the razor, make it back on the blades. Echo speakers, Kindles, Fire TV sticks, doorbells — priced to get inside the house, where the shopping happens.
Over the weekend, without an announcement, the prices went up. The base Echo Dot moved from $49.99 to $79.99, a 60 percent increase on the cheapest thing Amazon makes. The 16-gigabyte Kindle went from $109.99 to $149.99. The Fire TV Stick 4K Max went from $59.99 to $84.99. Fortune, which caught the changes, quoted the company blaming "significant increases in memory and storage component costs." That explanation is accurate.
It is also what Amazon said three weeks earlier about something much larger. On the July 30 earnings call, Andy Jassy told investors the company now expects roughly $220 billion in cash capital spending this year, up from about $200 billion, and named the higher cost of memory as the reason. One shortage, two line items: twenty billion dollars of additional data center, and thirty dollars on a smart speaker.
Memory got expensive because the AI buildout wants all of it. J.P. Morgan Global Research estimates DRAM prices will have risen more than 400 percent between the start of 2024 and the end of 2026. The Kindle in question holds sixteen gigabytes and does almost no computing. It is competing for fab capacity with server racks, and losing.
But the subsidy was dying without any help from chip prices. The same Journal reporting turned up a former senior employee who worried the division had hired ten thousand people and built a smart timer. The downstream spending never really came; people set alarms and asked about the weather. Memory costs did not end a strategy that was working. They removed the last argument for one that wasn't.
And this isn't only Amazon. Microsoft has raised Xbox prices by $100 to $150 and stopped selling its largest storage configuration. Apple, Dell, HP, Lenovo and Asus have raised prices or reduced the memory in their products. For a decade the cheap device on the shelf was not really a product. It was a door — held open at a loss because someone believed it led somewhere. The door still opens. It costs $79.99 now.
One shortage, two line items: twenty billion dollars of additional data center, and thirty dollars on a smart speaker.
