Nvidia's Memory Chip Change May Increase Prices

Nvidia's Memory Shift and Its Impact on the Market

Nvidia has reported that prices of server memory could double by the end of 2026 due to its shift towards memory chips used in smartphones for artificial intelligence servers, according to a report published by Counterpoint Research.

In the last two months, electronic supply chains have faced shortages of older generation memory chips as manufacturers pivot to high-quality memory chips suitable for AI applications. However, Counterpoint has indicated that a new problem is on the horizon. Nvidia has decided to switch the type of memory chip it uses from DDR5 to LPDDR, which are low-power memory chips typically found in phones and tablets, in an effort to reduce costs for AI servers.

Nvidia is expected to disclose its results this evening. Given that each AI server requires more memory chips than a smartphone, this shift is anticipated to create a sudden surge in demand, which the industry may not be equipped to handle.

Memory suppliers such as Samsung Electronics, SK Hynix, and Micron are facing shortages in older generation dynamic random access memory products after reducing production to focus on high-bandwidth memory production. Counterpoint highlights that there is a risk of the low-level supply tightness spreading upwards. Chip manufacturers are evaluating whether to shift more production capacity to LPDDR to meet Nvidia's needs.

“The risk of being a comprehensive customer means that Nvidia's shift to LPDDR has made it an entity similar in nature to a major smartphone manufacturer. The supply chain cannot easily absorb demand of this magnitude,” says Counterpoint.

The firm forecasts that the prices of server memory chips could double by the end of 2026. High server memory prices could further strain data center budgets already pressured by record spending on graphics processing units and power upgrades, increasing costs for cloud providers and AI developers.