HP Inc's stock plummeted 5.06% during intraday trading on Tuesday, reflecting significant investor concern over the company's near-term profitability.

The sharp decline is attributed to severe margin pressure stemming from the AI boom. Industry analysis indicates that memory and storage costs have surged to approximately 35% of HP's bill of materials, a dramatic increase from 15-18% just a quarter earlier. This cost inflation is driven by memory-chip suppliers prioritizing high-bandwidth memory for AI data centers over components for consumer devices like PCs, creating a shortage and repricing the market. The situation forces hardware makers like HP to either raise prices for consumers, potentially hurting sales, or absorb the cost and surrender margin.

The AI buildout is creating a stark divide in the technology sector, benefiting memory suppliers with pricing power while companies that assemble finished goods, like HP, face a prolonged period of compressed margins as they navigate a shortage they cannot influence.