Nvidia Corp. (NVDA) is making a seemingly small technical decision that could have enormous ripple effects across the entire server memory market. The chip giant is switching to Low-Power Double Data Rate (LPDDR) memory chips—the kind you'd typically find in your smartphone or tablet—instead of the traditional DDR5 chips that power data centers. And according to Counterpoint Research, this move could send server memory prices through the roof.

A Supply Chain Under Siege

Here's the problem: the memory chip industry wasn't exactly prepared for Nvidia to suddenly start gobbling up smartphone-style chips at data center scale. Research Director MS Hwang described it as "a seismic shift for the supply chain which can't easily absorb this scale of demand."

The timing couldn't be worse. The industry is already dealing with a global shortage of legacy memory chips, as manufacturers have been prioritizing advanced AI-ready components. Now Nvidia's massive appetite for LPDDR chips threatens to strain an already tight supply chain even further.

Counterpoint Research warns that the low-end shortage could cascade upward as chipmakers face a difficult choice: do they shift more production capacity to LPDDR to satisfy Nvidia's demand? If they do, the firm expects server memory chip prices could double by late 2026. Hwang specifically projects a "2x increase in DRAM module prices for DDR5 64GB RDIMM across Q1 2025 to the end of 2026 in a highly constrained scenario."

The AI Boom's Collateral Damage

This latest development is just another chapter in the semiconductor industry's ongoing AI-induced chaos. The sector has been experiencing significant disruptions as companies race to secure chips for artificial intelligence applications.

Back in September, Samsung Electronics (SSNLF) hiked its key memory chip prices by up to 60%, triggering what the industry now calls a "panic ordering" situation. Meanwhile, SK Hynix, a major Nvidia supplier, has completely sold out its chip supply for 2026. The company is riding what insiders describe as a "super cycle" in the memory chip industry, leading to record profits and plans to increase investments even further.

Not everyone is convinced this AI-driven frenzy will end well. Billionaire Peter Thiel recently made headlines by fully exiting his Nvidia stake and sharply reducing his Tesla (TSLA) holdings, moves that many interpret as concern over a potential AI market bubble.

What It Means for Nvidia

Nvidia currently ranks in the 98th percentile for growth and the 3rd percentile for value, reflecting a company that's expanding rapidly but trading at premium valuations. The company is scheduled to report its third-quarter earnings after market close on Wednesday, which should provide more insight into how it's navigating these supply chain pressures.

On a year-to-date basis, Nvidia stock has climbed 31.13%, though it experienced some turbulence on Tuesday, falling 2.81% to close at $181.36. Investors will be watching closely to see whether the company addresses this memory chip transition and its potential impact on future server costs during the earnings call.

The broader question is whether the industry can scale up LPDDR production fast enough to meet Nvidia's needs without triggering the price explosion that Counterpoint Research is warning about. If not, we could be looking at a significant increase in the cost of AI infrastructure over the next two years—and that's a cost that will eventually get passed along somewhere.