Nintendo shares plunged more than 10% Wednesday as investors digested a brutal reality: the memory chip shortage squeezing the tech industry just hit gaming's biggest comeback story. The Japanese gaming giant faces surging costs for DRAM chips - critical components in its Switch 2 console - with prices projected to spike up to 95% this quarter. Despite beating profit estimates with a 24% year-over-year jump, Nintendo's warning that sustained memory costs could erode margins sent investors running for the exits.
Nintendo just discovered what happens when gaming consoles compete with AI for the same chips. The company's shares nosedived more than 10% Wednesday, wiping out billions in market value as investors processed the real cost of the global memory shortage.
The selloff came just a day after Nintendo posted quarterly results that beat profit expectations with a 24% year-over-year jump and 86% revenue growth, powered by its original Switch console - now officially the company's best-selling device ever since launching in 2017. But the celebration was short-lived. Revenue missed analyst estimates, and company president Shuntaro Furukawa delivered the warning investors didn't want to hear: if memory chip prices stay elevated long-term, margins will take a hit.
The culprit is DRAM - dynamic random access memory chips that Nintendo relies on for its gaming consoles. The same chips are in white-hot demand from AI companies and data centers, creating a supply crunch that's sent prices into orbit. Contract prices for conventional DRAM chips are projected to jump 90% to 95% in the first quarter alone compared to the previous three months, according to market researcher TrendForce in a Monday report.
"Investors remain concerned about the impact that memory costs will have on the company's margins," Andrew Jackson, head of Japanese Equity Strategy at Ortus Advisors, told reporters. It's a concern Furukawa acknowledged directly during Tuesday's earnings call. While he insisted memory price rises aren't significantly impacting results for the current financial year, he couldn't dodge the longer-term question.
