Nvidia’s (NVDA) plan to use smartphone-style memory chips in its AI servers could cause server-memory prices to double by late 2026, Reuters reported, citing a report by Counterpoint Research.
In the last two months, electronics supply chains globally have been impacted by a shortage of legacy memory chips as manufacturers turned their focus to high-end memory chips suited to semiconductors designed for AI applications, the report added.
Counterpoint noted that there is a new issue brewing. Nvidia recently decided to reduce AI server power costs by changing the kind of memory chip it uses to LPDDR — or Low-Power Double Data Rate, a type of Random Access Memory, or RAM, specifically designed for mobile devices to conserve power — from DDR5, which are usually used in servers.
Nvidia did not immediately respond to a request for comment from Seeking Alpha.
Because each AI server requires more memory chips than a smartphone, the change is expected to create sudden demand that the industry is not ready to handle, the report noted.
Memory suppliers like Samsung Electronics (OTCPK:SSNLF), SK hynix (OTCPK:HXSC.F) and Micron Technology (MU) are already facing shortages of older dynamic RAM products after reducing production to focus on high-bandwidth memory, or HBM, which is necessary to make the advanced accelerators for AI, the report added.
Tightness at the low end of the market is at risk of spreading upward as chipmakers are weighing if they should divert more factory capacity to LPDDR to meet Nvidia’s needs, the report noted.
“The bigger risk on the horizon is with advanced memory, as Nvidia’s recent pivot to LPDDR means they’re a customer on the scale of a major smartphone maker – a seismic shift for the supply chain which can’t easily absorb this scale of demand,” said Counterpoint.
The research firm expects prices for server-memory chips to double by the end of 2026.
Higher server-memory prices could increase costs for cloud providers and AI developers, potentially adding pressure to data-center budgets that are already elevated by record spending on graphics processing units, or GPUs, and power upgrades.
Nvidia is slated to report its third quarter results post market on Nov. 19.