Even record-breaking sales may not be enough to shield Nintendo from mounting investor concerns over soaring memory chip prices, which could significantly impact the cost of its upcoming Switch 2 console.
Nintendo is set to announce its third-quarter earnings next week, and expectations are high following strong holiday sales in the US that point to robust early demand for the Switch 2. However, an ongoing shortage of memory chips—largely driven by surging demand from the AI sector—is threatening to push production costs higher, potentially forcing Nintendo to raise the console’s price and slowing the company’s stock recovery.
According to Pelham Smithers, a UK-based gaming industry analyst, the rising cost of memory could seriously affect Nintendo’s console margins unless prices ease. The company’s shares have already dropped more than 30% from their August peak, recording their weakest monthly performance since 2008 in December.
Memory Shortage Puts Pressure on Console Makers
An aggravated Donkey Kong stands behind Switch 2 console
(Image source: Nintendo of America with edits)
Manufacturers worldwide are facing shrinking profit margins due to limited memory supply. Heavy investment in AI infrastructure has redirected memory production toward high-margin enterprise uses, leaving fewer chips available for consumer electronics. Smartphone manufacturers have already begun cutting their shipment forecasts for 2026 as a result.
For Nintendo, this supply crunch arrives at a crucial moment. The launch of a new console is a rare opportunity to attract new users, and concerns that higher component costs could lead to a Switch 2 price hike have tempered the excitement surrounding its record-setting debut earlier this year.
Data from TrendForce shows that prices for DRAM and flash storage components used in Nintendo devices rose sharply in the December quarter, with shortages expected to worsen. Citigroup analysts predict that average DRAM prices could rise by as much as 120% in 2026, while NAND flash prices may increase by around 90%.
Switch 2 Pricing Under Scrutiny
Bloomberg Intelligence analyst Nathan Naidu estimates that Nintendo may need to raise the Switch 2’s retail price by approximately 15% to offset rising memory costs. Once the company’s existing chip inventory and fixed-price supply contracts run out, higher costs could directly impact profitability.
Currently priced at $450 in the US, the Switch 2 is already Nintendo’s most expensive console to date. Analysts warn that pushing the price beyond $500 could significantly weaken consumer demand.
Rising memory prices are also affecting competitors like Sony, weighing on investor sentiment around the PlayStation business. However, Nintendo is seen as particularly exposed since the Switch 2 is still early in its lifecycle and may be selling at or near cost. In contrast, Sony’s PlayStation 5 is a more mature product with healthier margins, giving Sony more flexibility to absorb cost increases.
Possible Ways to Offset Higher Costs
Nintendo may still have options to manage rising memory expenses. One approach could be reducing the console’s internal storage, shifting the cost burden to consumers who would need to purchase external memory cards.
Some analysts expect Nintendo’s management to address memory-related concerns during the upcoming earnings call, which could help reassure investors in the short term. Despite caution around supply chain challenges, several analysts continue to maintain a positive outlook on the stock.
Recent data also suggests that fewer investors are betting against Nintendo. Short interest in the company’s shares has dropped to about 1% of free float, down from nearly 2% in mid-August.
Citigroup analyst Tokiya Baba believes Nintendo’s shares could see a short-term boost if earnings exceed expectations. He estimates the company sold around 7 million Switch 2 units between October and December. Upcoming releases, including the Super Mario Galaxy Movie, could also support the stock.
Long-Term Risks Remain
Despite strong sales momentum, analysts caution that a prolonged memory supply crisis could limit Nintendo’s long-term upside. As Smithers notes, demand for the Switch 2 is not the issue—rising memory costs are, and those pressures may intensify if prices continue climbing.
