Nvidia shift, AI chip shortages threatening to hike gadget prices

Analysts warn that the cost of your smartphone could rise, as the artificial intelligence boom clogs supply chains and the recent change in… Nvidia Their products can make it worse.

Artificial intelligence data centers, on which technology giants around the world spend money Hundreds of billions of dollarsrequires chips from suppliers, such as Nvidia, that rely on many different components and companies to create the desired GPUs.

But other companies like AMDlike super scale Google and Microsoftand other component suppliers all depend on this supply chain.

Many parts of the supply chain cannot keep up with demand, slowing down components that are critical to some of the world’s most popular consumer electronics. those components We are seeing a significant price increase, which threatens to drive up the prices of the final product and may even lead to shortages of some devices.

“We see the rapid increase in demand for AI in data centers creating bottlenecks in many areas,” Peter Hanbury, a partner in Bain & Company’s technology practice, told CNBC.

One stark review came from Alibaba CEO Eddie Wu, CEO of the Chinese tech giant Alibaba.

Wu, whose company is building its own artificial intelligence infrastructure and Designs its own chipsHe said last week that there is a shortage at manufacturers of semiconductors, memory chips and storage devices such as hard drives.

“There is a supply shortage situation,” Wu said, adding that “the supply side will be a relatively large bottleneck.” He added This may last two to three years.

Hanbury of Bain and Co. said: There is a shortage of hard disk drives, or SSDs, that store data. Hard drives are used in the data center. These are the favorites of super-scalers: big companies like Microsoft and Google. But as hard drives reached their maximum capacity, these companies switched to using solid-state drives, or SSDs, another type of storage device.

However, these SSDs are essential components of consumer electronics.

Another big focus is on a type of chip under the memory umbrella called dynamic random access memory, or DRAM. Nvidia chips use high-bandwidth memory It is a type of chip that contains several DRAM semiconductors.

Memory prices have risen due to high demand and short supply. Counterpoint Research said it expects memory prices to rise 30% in the fourth quarter of this year and another 20% in early 2026. Even small imbalances in supply and demand can have a big impact on memory pricing. Because of the demand for HBM and GPUs, chipmakers are prioritizing them over other types of semiconductors.

“DRAM is certainly a bottleneck as AI investments continue to fuel demand-supply imbalances with HBM being prioritized by chipmakers,” MS Hwang, research director at Counterpoint Research, told CNBC.

“Imbalances of 1-2% can lead to sharp price increases, and we are seeing this number reaching 3% levels right now – this is very significant.”

The problem is that Nvidia is increasingly using the latest generation of LPDDR memory, which is also used by high-end consumer electronics makers like Samsung and… apple.

The industry typically handles demand for this product from a handful of major electronics companies. But now Nvidia, which has a lot of scope, is entering the mix.

“We also see there’s a bigger risk on the horizon in advanced memory as Nvidia’s recent shift to LPDDR means they’re customers on the scale of a major smartphone maker — a seismic shift for a supply chain that can’t easily accommodate this volume of demand,” Counterpoint Research’s Huang said.

From chip manufacturers such as TSMC, Intel And Samsung, there is only so much capacity. If there is a high demand for certain types of chips, these companies will prioritize those types, especially from their larger customers. This could lead to shortages of other types of semiconductors elsewhere.

Memory chips, especially DRAM which has seen a spike in prices, are of particular concern because they are used in many devices from smartphones to laptops. This may lead to higher prices for the world’s favorite electronic devices.

Dynamic random access memory (DRAM) and storage represent about 10% to 25% of the materials cost of a typical PC or smartphone, according to Bain & Co.’s Hanbury. A 20% to 30% price increase in these components would increase total material costs by 5% to 10%.

“In terms of timing, the impact is likely to start soon, as component costs are already increasing and are likely to accelerate next year,” Hanbury said.

Furthermore, there is now demand from players involved in AI data centers such as Nvidia, for components that would normally be used for consumer devices such as LPDDR adding further demand to a market that is in limited supply.

If electronics companies can’t get the components needed for their devices because they’re in short supply or because they’re moving toward AI data centers, there could be a shortage of the world’s most popular gadgets.

“Besides the high cost, a second problem is the inability to secure enough components, which restricts the production of electronic devices,” said Counterpoint Research’s Huang.

XiaomiAmazon, the world’s third-largest smartphone seller, said it expects consumers to see a “significant rise in retail prices for products,” according to a report. Reuters I reported this month.

Jeff Clark, Chief Operating Officer at DaleHe said this month that the rise in ingredient prices was “unprecedented.”

“We haven’t seen costs move at the rate we have,” Clark said on an earnings call, adding that the pressure is showing up across different types of memory chips and solid-state storage drives.