^{Photo: Bloomberg.com}

Nintendo Shares Drop Sharply as Investors Weigh Chip Shortages and Console Risks

Nintendo’s stock tumbled more than 10% in midweek trading after the company reported quarterly revenue below market expectations, reigniting concerns over rising memory costs and the long-term performance of its latest console. The selloff pushed Nintendo’s year-to-date losses past 15%, highlighting growing investor unease despite strong profit growth and solid hardware sales.

While quarterly revenue jumped an impressive 86% compared with the same period last year, it still fell short of analyst forecasts. On the positive side, operating profit climbed 24% year over year, supported by continued demand for Nintendo’s hardware lineup. The original Nintendo Switch, launched in 2017, remains the company’s best-selling console of all time, and its successor now accounts for the majority of current console shipments.

Still, markets focused less on backward-looking performance and more on forward risks.

Memory Chip Shortages Put Pressure on Margins

At the center of investor anxiety is a global shortage of memory chips, particularly dynamic random access memory (DRAM), a core component used in Nintendo’s consoles.

Demand for DRAM has surged as artificial intelligence workloads and data centers consume an increasing share of global supply. This imbalance has driven a sharp rise in prices. Industry trackers estimate that contract prices for conventional DRAM in the first quarter alone are projected to jump by roughly 90% to 95% compared with the previous quarter.

Executives across the semiconductor sector have warned that the tight supply environment may not ease anytime soon, with some industry leaders suggesting the memory crunch could persist through 2027.

Andrew Jackson, head of Japanese Equity Strategy at Ortus Advisors, noted that investors are increasingly worried about how these elevated component costs could squeeze Nintendo’s margins over time.

Nintendo President Shuntaro Furukawa said that current memory price increases are not materially impacting results for the ongoing financial year. However, he acknowledged that profitability could come under pressure if high component costs remain in place over the longer term.

Could Higher Costs Lead to Console Price Hikes?

With memory prices climbing, analysts are beginning to question whether Nintendo may eventually pass some of those costs on to consumers.

Serkan Toto, CEO of game consultancy Kantan Games, said that if current trends in the memory market continue, price increases for Nintendo hardware would not be surprising. However, he cautioned that such a move could be difficult for Nintendo’s broad and relatively casual user base to absorb.

That concern is especially relevant for Nintendo’s newest console, Switch 2, which is already positioned at the higher end of the company’s historical pricing range. Introduced last June, Switch 2 now represents the bulk of Nintendo’s console sales, making its adoption rate critical to the company’s near-term growth.

Momentum Matters for Switch 2

Beyond chip costs, investors are also watching closely to see whether Switch 2 can replicate the extraordinary launch success of its predecessor.

Nintendo reaffirmed its full-year sales forecast for Switch 2 this week, but analysts remain cautious. Toto emphasized that the first year of any new console is decisive, noting that the original Switch set an exceptionally high benchmark with its breakout debut.

In his view, Nintendo is now facing the challenge of living up to its own past success in a far more competitive and cost-constrained environment.

James McWhirter, senior analyst at Omdia, echoed those concerns, calling 2026 a potential “make-or-break” year for Switch 2 as Nintendo works to expand its appeal beyond core fans and into the mass market.

Game Releases and Media Push Aim to Drive Upgrades

Nintendo is counting on a steady stream of high-profile content to keep consumer interest strong and encourage upgrades.

The company plans to release “Mario Tennis Fever” in February, followed by “Pokémon Pokopia” in March, both tied to its flagship franchises. In April, Nintendo will also debut “The Super Mario Galaxy Movie,” hoping to recreate the halo effect of its 2023 Super Mario film, which significantly boosted console engagement and hardware sales.

Management is betting that this combination of exclusive games and multimedia exposure will help sustain momentum for Switch 2 and offset broader macro and supply-chain pressures.

Investors Stay Cautious Despite Profit Growth

In summary, Nintendo finds itself in a mixed position. On one hand, profits are rising, console sales remain strong, and the company continues to leverage its powerful intellectual property across games and film. On the other, surging DRAM prices, a prolonged global memory shortage, and uncertainty around Switch 2’s early traction are weighing heavily on sentiment.

For now, markets appear focused on the risks ahead rather than the gains already booked. Until there is clearer visibility on memory costs and Switch 2 adoption, Nintendo’s shares may remain volatile, even as the company posts solid operational results.

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