Post by : Badri Ariffin

Nvidia's recent alteration in its AI server architecture has raised fresh alarms within the global electronics supply network. The company's strategy to incorporate LPDDR — low-power memory commonly used in smartphones and tablets — is anticipated to sharply elevate server-memory prices by late 2026, as indicated by recent research from Counterpoint.

Recently, manufacturers worldwide have been battling a growing scarcity of legacy memory chips. Many chip producers redirected their focus towards high-performance memory suitable for advanced AI chips, leaving older product lines in short supply. Nvidia's pivot to LPDDR introduces an unexpected layer of complications.

To lower power usage in its AI servers, Nvidia plans to swap out DDR5 server memory for LPDDR. However, each server necessitates a substantially larger number of chips compared to a smartphone, resulting in a sudden surge in demand that current production cannot satisfy. Counterpoint highlighted that Nvidia’s requirement parallels that of a leading smartphone brand — a dynamic that could redefine how memory suppliers allocate manufacturing capacity.

Samsung Electronics, SK Hynix, and Micron are already experiencing tight supply conditions after scaling back production of older dynamic random-access memory in favor of high-bandwidth memory production, crucial for AI accelerators. The additional demand for LPDDR risks aggravating these supply issues.

Should chipmakers reallocate capacity to cater to Nvidia’s needs, shortages could amplify and prices might surge significantly. Counterpoint predicts that server-memory prices could double by the end of 2026, a scenario that would exert further stress on cloud providers and AI developers already facing escalating GPU and power infrastructure expenses.

Nvidia is projected to disclose its earnings report later today, with investors keenly observing how this supply chain transition may impact its forthcoming product strategy.

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