Rising prices are a red flag for consumers. Nobody likes paying more for a laptop or a printer. However, for investors tracking the technology hardware sector, recent reports that Dell Technologies (NYSE: DELL) and HP Inc. (NYSE: HPQ) are raising prices on commercial products should be viewed as a bullish signal, not a warning.
The trigger for these price hikes is a sharp increase in component costs. Specifically, the market is facing a scarcity of memory chips (DRAM and NAND) and solid-state drives (SSDs). Typically, in a weak economy, rising input costs crush profit margins because companies lack the leverage to pass those costs on to buyers. They simply have to eat the loss to keep sales moving.
