The AI boom has a direct and costly side effect for two of the world's largest gaming companies: Sony and Nintendo. Memory chip prices are expected to surge up to 63% this quarter, driven almost entirely by demand from AI data centers, translating into higher component costs and tighter margins.
Sony projects a 6% decline in annual gaming sales to $28 billion, citing surging memory costs and waning PlayStation 5 hardware sales. Despite the revenue drop, Sony expects gaming profits to climb 30%, buoyed by stronger first-party software and the absence of prior impairment losses.
Nintendo faces similar headwinds as it prepares to launch a successor to the Switch. The company has expressed concerns over memory price impacts on margins, and supply challenges could delay releases or push prices higher. Both companies are also dealing with rising semiconductor and logistics costs.
Why AI? AI data centers require massive quantities of high-bandwidth memory to train large language models, pulling supply away from other industries. For investors, Sony's divergence of falling revenue but rising profits highlights the power of its software ecosystem. Meanwhile, Nintendo investors should watch hardware pricing closely-any price hike or spec downgrade for the next Switch is likely tied to memory costs.