Nvidia's Shift to Smartphone Memory Fuels Concerns Over Server Memory Costs

Post by : Bianca Suleiman

The recent decision by Nvidia to transition its AI server architecture is raising alarms in the global electronics market. By integrating LPDDR—low-power memory generally used in smartphones—the chipmaker may accelerate the rise in server memory prices, potentially doubling them by late 2026, as highlighted in a Wednesday report from Counterpoint.

In recent months, manufacturers have faced increasing difficulties due to a shortage of legacy memory chips. Many chip producers diverted their attention to high-performance memory necessary for sophisticated AI chips, leaving older lines lacking. Nvidia's shift to LPDDR presents an unforeseen challenge on top of these existing issues.

The company’s objective is to lower energy usage in its AI servers by substituting DDR5 memory with LPDDR. However, each server will need significantly more chips than a smartphone, resulting in a surge in demand that current production cannot accommodate. Counterpoint emphasized that Nvidia's requirement is comparable to that of a leading smartphone manufacturer, which might lead to a profound impact on how memory suppliers manage their production capacities.

Samsung Electronics, SK Hynix, and Micron are already navigating tight supply scenarios after reducing the output of older dynamic random-access memory to enhance high-bandwidth memory production, vital for AI accelerators. The additional shift towards LPDDR risks exacerbating these supply constraints.

Should chipmakers reallocate resources to satisfy Nvidia’s demands, it could result in broader shortages and significant price increases. Counterpoint forecasts server memory prices could potentially see a twofold increase by late 2026, intensifying the financial burden on cloud service providers and AI developers who are already facing rising costs for GPUs and power infrastructure.

Nvidia's earnings report is anticipated later today, with stakeholders keenly observing how this supply chain transition might affect the company's upcoming product strategies.