Sony, Nintendo hit by AI-driven chip squeeze as gaming costs climb
Synopsis
Sony and Nintendo are facing mounting pressure from soaring memory chip prices driven by AI demand, with both gaming giants warning of higher costs, slimmer margins and tougher pricing decisions ahead.
Sony and Nintendo warned investors that soaring memory chip prices driven by the AI boom are beginning to weigh heavily on their gaming businesses, forcing price hikes and increasing pressure on profitability. The Japanese gaming giants said rising costs for memory components, now in short supply globally due to surging AI data centre demand, are disrupting supply chains across the technology sector, affecting everything from gaming consoles to smartphones and cars.
Key highlights
- Sony and Nintendo warned that rising memory prices are increasing gaming hardware costs
- AI data centre demand is tightening global chip supply across industries
- Nintendo raised Switch 2 prices in Japan and the US amid cost pressures
- Sony said PS5 profitability will depend on securing memory at reasonable prices
- Analysts warned Nintendo’s price-sensitive customer base could slow demand
AI boom sends memory prices soaring
Memory chip prices doubled in the first quarter compared with the previous quarter and are expected to jump as much as 63% again this quarter, according to industry estimates, as AI infrastructure spending accelerates globally.
Major suppliers including Samsung Electronics, SK Hynix and Micron Technology have pledged billions of dollars to expand production, but analysts said new facilities can take more than a year to begin operations.
The supply crunch has created fresh challenges for gaming hardware makers already navigating higher logistics costs and geopolitical uncertainty.
Nintendo lifts Switch 2 prices
Nintendo said higher memory and component costs, combined with tariff pressures, are expected to add roughly 100 billion yen ($638 million) to expenses this financial year.
The company announced price increases for its upcoming Switch 2 console, with the Japanese-language model rising by 10,000 yen to 59,980 yen, while the US version will cost $499.99, up by $50.
Nintendo President Shuntaro Furukawa said exchange rates and component costs played a major role in the pricing decision.
HSBC analyst Kazunori Ito said the move suggested memory inflation had become too severe for Nintendo to absorb internally.
“The rise in memory costs has become severe enough that it could no longer be absorbed internally,” Ito said.
Nintendo expects profitability to remain broadly flat this financial year despite the higher prices.
Sony braces for prolonged cost pressure
Sony Group also warned that elevated memory prices are likely to remain a challenge next year despite efforts to secure supply for the current financial year.
Sony earlier raised the price of its PS5 console in the US by $100 to $649.99.
CEO Hiroki Totoki said the company was exploring ways to offset costs outside memory procurement while maintaining hardware profitability.
Sony added that profit forecasts for its gaming division also account for investment in its next-generation gaming platform.
The company is expected to benefit later this year from the launch of Grand Theft Auto VI, which analysts expect to significantly boost software sales and ecosystem engagement.
Why this matters for Australia
Australia’s gaming and electronics retail sector could also feel the impact of rising hardware costs and tighter supply conditions.
Higher console prices may affect consumer spending as inflation pressures persist, while electronics distributors and retailers could face inventory constraints if chip shortages worsen further.
The developments also highlight how the global AI investment boom is beginning to reshape broader consumer technology markets beyond data centres and cloud computing.
Investors remain cautious on gaming sector
Shares in both Sony and Nintendo have faced pressure in recent months amid concerns that AI-related supply shortages and geopolitical tensions in the Middle East could continue squeezing margins for electronics manufacturers.
Analysts said Nintendo may face greater risks because its customer base tends to be more price sensitive, particularly early in a console cycle.
Gaming consultancy founder Serkan Toto said Nintendo would now face greater pressure to deliver blockbuster first-party games to justify higher console prices and sustain demand momentum.
What next
Investors will closely watch whether memory supply improves in the second half of the year as chipmakers expand production capacity.
Attention will also remain on upcoming gaming launches, including Nintendo’s Switch 2 rollout and Sony’s expected boost from Grand Theft Auto VI, as both companies attempt to balance rising costs with consumer demand.
FAQs
Q1: Why are memory chip prices rising?
Memory chip prices are rising because of surging demand from artificial intelligence data centres, which require large amounts of advanced memory hardware.
Q2: Why did Nintendo raise Switch 2 prices?
Nintendo said higher component costs, memory inflation and currency movements forced the company to increase pricing for the Switch 2.
Q3: How is Sony responding to rising memory costs?
Sony said it has secured memory supply for the current year and is exploring additional cost-cutting measures to protect gaming profitability.
Q4: Could gaming hardware become more expensive globally?
Yes. Analysts expect gaming consoles, PCs and other electronics could see further price increases if chip shortages and AI-driven demand pressures continue.
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I write about markets, money, and the macro forces that move them. Passionate about turning complex economic trends into sharp, easy-to-understand stories. Off the clock, it’s hip hop, rock, reggae -- and a mix of cricket and basketball.
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