Nvidia shift, AI chip shortages threatening to hike gadget prices
An Apple Store logo is seen reflected on the glass exterior of a Samsung flagship store in Shanghai, China, on Monday, October 20, 2025.
Wang Gang | Feature China | Future Publishing | Getty Images
Analysts warn that the cost of your smartphone could rise as the AI boom clogs up supply chains and a recent change. Nvidia may damage the products.
Artificial intelligence data centers around the world, where tech giants spend hundreds of billions of dollars, demand chips from suppliers like Nvidia, which rely on many different components and companies to create their graphics processing units.
But other companies like it too AMDhyperscalers like: Google And Microsoftand other component suppliers all rely on this supply chain.
Many parts of the supply chain are unable to keep up with demand, slowing down critical components for some of the world’s most popular consumer electronics products. The prices of these components are experiencing huge increases, threatening price increases for the end product and may even lead to shortages of some devices.
“We are seeing the rapid growth in demand for AI in data centers leading to bottlenecks in many areas,” Peter Hanbury, technology practice partner at Bain & Company, told CNBC.
Where is the supply chain blocked?
One of the harshest evaluations came Alibaba’s CEO Eddie Wu, CEO of the Chinese tech giant Alibaba’s.
Wu, whose company creates its own artificial intelligence infrastructure and designs its own chips, said last week that semiconductor manufacturers are experiencing shortages of storage devices such as memory chips and hard drives.
“There is a situation of undersupply,” Wu said, adding that “the supply side will be a relatively large bottleneck.” He added that this could take 2-3 years.
Bain and Co.’s Hanbury said there is a shortage of hard disk drives, or HDDs, that store data. HDDs are used in the data center. These are preferred by hyperscalers: large companies like Microsoft and Google. However, as the capacity of HDDs became full, these companies turned to solid state drives or SSDs, another type of storage device.
But these SSDs are essential components for consumer electronics.
The other big focus is on a type of chip under the memory umbrella called dynamic random access memory, or DRAM. Nvidia’s chips use high-bandwidth memory, a type of chip that stacks multiple DRAM semiconductors.
Memory prices have increased as a result of huge demand and lack of supply. Counterpoint Research said it expects memory prices to rise 30% in the fourth quarter of this year and 20% in early 2026. Even small imbalances in supply and demand can have large impacts on memory pricing. Due to the demand for HBM and GPUs, chip manufacturers are prioritizing them over other types of semiconductors.
“DRAM is definitely a bottleneck as AI investments continue to feed the imbalance between supply and demand, with HBM for AI being prioritized by chipmakers,” MS Hwang, research director at Counterpoint Research, told CNBC.
“Imbalances of 1-2% can trigger sharp price increases, and we are now seeing this figure rise to 3%, which is very significant.”
Why are there problems?
Building capacity in various areas of the semiconductor supply chain can be capital intensive. Bain & Co.’s Hanbur said this is an industry that is known to be risk-averse and has not added the necessary capacity to meet forecasts provided by key industry players.
“The direct cause of the shortage is the rapid growth in demand for data center chips,” Hanbury said.
“Basically, suppliers were concerned that the market was too optimistic and they didn’t want to add capacity that was too expensive, so they didn’t meet the forecasts their customers provided. Now suppliers need to add capacity quickly, but as we know it takes 2-3 years to add semiconductor manufacturing plants.”
Nvidia is at the center
A lot of attention is being paid to Nvidia, given that it dominates when it comes to chips deployed in AI data centers.
For example, it is a large customer of high bandwidth memory. Its products are produced by TSMC, which has major customers such as Apple.
But analysts are focused on a change Nvidia is making to its products that has the potential to put huge pressure on consumer electronics supply chains. The US giant is increasingly turning to using a type of memory called Low Power Double Data Rate (LPDDR) in its products. This is seen as more power efficient than previous Double Data Rate or DDR memory.
The problem is that Nvidia is increasingly using the latest generation of LPDDR memory, which is also used by high-end consumer electronics manufacturers like Samsung and others. Apple.
Typically, the industry dealt with demand for this product from a handful of large electronics manufacturers. But now Nvidia, which has massive scale, is also joining the mix.
“We see a greater risk on the horizon with advanced memory, as Nvidia’s recent push towards LPDDR means they are a customer on the scale of a major smartphone manufacturer – a seismic shift for the supply chain that cannot easily meet demand at that scale,” Counterpoint Research’s Hwang said. he said.
How is the AI boom affecting consumer electronics?
Here’s the connection between all of this.
From chip manufacturers such as TSMC, Intel and in Samsung the capacity is only so much. If there is a large demand for certain types of chips, these companies will prioritize those, especially those from large customers. This could lead to shortages of other types of semiconductors elsewhere.
Memory chips, especially DRAM, where prices are soaring, are of particular concern because they are used in devices ranging from smartphones to laptops. This may lead to price increases in the world’s most popular electronic products.
DRAM and storage represent about 10% to 25% of the bill of materials for a typical computer or smartphone, according to Hanbury of Bain & Co. A 20% to 30% price increase on these components will increase total bill of materials costs by 5% to 10%.
“In terms of timing, the impact will likely begin shortly as component costs are already rising and will likely accelerate into next year,” Hanbury said.
On top of this, there is demand from players in AI data centers such as Nvidia for components normally used in consumer devices such as LPDDR, adding further demand to a market where supply is constrained.
If electronics companies cannot have the necessary components for their devices, either because of insufficient supply or because they are moving towards AI data centers, then there could be a shortage of the world’s most popular devices.
“Beyond the increase in cost, there is a second problem, which is the inability to secure enough components, which constrains the production of electronic devices,” said Hwang of Counterpoint Research. he said.
What do technology companies say?
A number of electronics companies have warned about the impact they are seeing from all this.
XiaomiApple, the world’s third-largest smartphone vendor, said it expects consumers to see a “significant increase in product retail prices.” Reuters reported this month.
Jeff Clark, chief operating officer DellHe said price increases for components this month were “unprecedented.”
“We haven’t seen costs moving at the rate we’ve seen,” Clark said on the earnings call, adding that the pressure was seen in various memory chips and storage hard drives.
Unintended consequences
AI infrastructure players are using chips similar to those used in consumer electronics. These are generally some of the more advanced semiconductors on the market.
But there are also older chips produced by the same companies that the AI market relies on. As these manufacturers shift their attention to serving AI customers, there could be unintended consequences for other industries as well.
“Many other markets, including auto, industrial, aerospace, and defense, for example, rely on the same core semiconductor manufacturing capabilities as the data center market,” Hanbury said, “and will likely see some impact from these price increases as well.”
