GoPro cautioned that it might not endure. The AI memory crisis is threatening the survival of companies that produce tangible products.

      GoPro issued a going-concern alert after witnessing an 80-115% surge in memory prices, leading to a 26% decline in revenue. The company is considering options such as a sale, a shift toward defense markets, and a 23% reduction in its workforce.

      On Monday, GoPro expressed "substantial doubt" regarding its ability to remain operational. The action-camera manufacturer reported a 26% drop in revenue for the first quarter and anticipates violating several loan agreements. Shares plummeted by as much as 14%.

      The main issue stems from memory costs. GoPro indicated that its earnings outlook has been "significantly impacted" by rising memory prices. In April, suppliers notified the company about a planned decrease in memory supply, which will further affect projected sales. The same reallocation of DRAM affecting affordable smartphones is now posing a threat to GoPro.

      The situation arises from the shift of wafer capacity by Samsung, SK Hynix, and Micron from consumer DRAM to high-bandwidth memory for AI data centers, which yields margins of 70% or more. In contrast, consumer DRAM margins range from 20% to 30%. Memory manufacturers prefer higher-margin clients, forcing others to either pay more or receive less.

      GoPro lacks the purchasing leverage to manage this price hike. Unlike Apple, which can negotiate better deals and transfer costs to consumers purchasing $1,000 phones, GoPro operates as a sub-$1 billion revenue company, selling products priced between $300 and $500. When memory prices double, profitability is severely impacted.

      The company has been granted waivers from its lender due to non-compliance with loan covenants. It foresees a liquidity shortage to meet obligations if default conditions are triggered and debts come due. It has a $50 million second-lien facility from Farallon Capital Management along with a revolving credit facility through Wells Fargo.

      GoPro has enlisted advisors to explore strategic options, including a potential sale or merger. It is also looking into the defense and aerospace sectors for "new markets and product categories." The company previously announced a 23% global workforce reduction in April.

      The pivot to defense mirrors Faraday Future’s shift to robotics: a consumer electronics firm under financial strain reaching out toward a higher-margin, government-funded sector with different competitive dynamics. It remains unproven whether GoPro's expertise in durable cameras will translate into defense contracts.

      The only immediate supply relief seems to be from China, where ChangXin Memory Technologies’ DRAM has reportedly been included in retail DDR5 kits from Corsair. However, CXMT also intends to convert 20% of its production to HBM due to the attractive margins. This memory shortage in the consumer sector is structural, not cyclical.

      The memory crisis is apparent across consumer electronics. The Asus ROG NUC 16 is priced $1,200 higher than last year's version, partly due to DDR5 costs. Dell raised laptop prices by 15-20% last December. Apple agreed to pay Samsung a 100% premium for LPDDR5X memory for the iPhone. These companies can shoulder the increased costs; GoPro cannot.

      Founded in 2002 by Nicholas Woodman, GoPro went public in 2014 with a $3 billion valuation. The firm popularized the action camera segment and created a brand synonymous with extreme sports and adventure content. Its share price surged above $90 in 2014 but currently trades below $1.

      The going-concern alert positions GoPro as the most prominent corporate victim of the AI-driven memory reallocation, and it is unlikely to be the last. Any consumer electronics firm with slim margins, limited purchasing leverage, and reliance on commodity DRAM faces similar challenges. The AI boom has created substantial wealth for three memory manufacturers and the large tech firms they supply, while GoPro finds itself on the opposite end of this equation.