Nvidia customers face over 15% server price hikes as memory costs soar - report

Rising memory chip costs are driving up the price of servers that incorporate Nvidia's artificial intelligence chips, according to Bloomberg News. Some of Nvidia's biggest customers are facing price increases of over 15%, the report stated, citing anonymous sources. These price hikes are anticipated to affect systems shipped early next year, including those featuring Nvidia's top-of-the-line Vera Rubin and Grace Blackwell chips.

The magnitude of the price surge will depend on the specific Nvidia chip generation and memory configuration utilized. Server manufacturers, such as those constructing systems on contract for large data center operators like Microsoft, Google, and Oracle, have recently informed their customers about the impending price hikes, according to the Bloomberg report.

Memory chip manufacturers Samsung Electronics, SK Hynix, and Micron Technology have gained significant power due to a surge in demand for AI infrastructure. Together, these three firms produce most of the world's dynamic random-access memory (DRAM). The performance of Nvidia's AI accelerator processors relies heavily on the amount of DRAM they are paired with.

Tech giants, including Apple and Qualcomm, have recently reported having to raise prices due to chip shortages. Nvidia boasts a gross margin of 75%, allowing it to charge tens of thousands of dollars per chip as supply from contract manufacturer Taiwan Semiconductor Manufacturing Company (TSMC) remains unable to meet the soaring demand.

Nvidia has also increased prices for its gaming-oriented PC graphics cards, as reported by industry news site Tom's Hardware.

Major customers, such as Amazon, Microsoft, Google, and Meta Platforms, are all in the process of developing their own in-house chip programs but still rely on purchases from Nvidia for their data center build-outs. The ability to achieve greater independence will also depend on access to supply from Samsung, SK Hynix, and Micron.

The price increases are expected to complicate the industry's ambitious AI data center build-out plans, adding complexity to project timelines, exacerbating labor shortages, tightening capital markets, and facing community resistance to new developments.