Shares of video game giant Nintendo Co., Ltd. (NTDOY) surged more than 10% in Wednesday trading in Japan, marking their largest single-day gain since April. The rally was driven by the unexpected popularity of its newly released game, Pokémon Pokopia, which has helped alleviate market concerns that rising memory chip prices could dampen demand for Nintendo's game software. Reports indicate that physical copies of Pokémon Pokopia have already sold out at several major U.S. retailers.
Released on March 5 as an exclusive single-player title for the Nintendo Switch 2 console, the game has become the fastest-selling exclusive single-player title on the platform to surpass one million units. In a research note, Jefferies analyst Atul Goyal wrote that with the game's "viral success," sales momentum for the Nintendo Switch 2 is rapidly accelerating, helping to offset the "rising memory cost pressure" that has weighed on Nintendo's share price since late 2025. He added that Amazon has increased the price of the Pokémon game to approximately $80, reflecting its strong demand.
Despite Wednesday's gains, Nintendo's stock remains nearly 30% below its recent peak in November of last year. Concerns have been mounting over rising console costs due to soaring memory chip prices fueled by strong artificial intelligence demand. These increased costs are weakening consumer willingness to purchase new Switch 2 games. This poses a challenge for Nintendo, which relies on high game sales to offset the thin margins on the console itself. The Switch 2 retails for around $450 and is already under pressure from U.S. tariffs and potential shipping cost increases due to conflict in the Middle East.
Recent earnings reports showed that while sales of Nintendo's flagship Switch 2 console exceeded average market expectations, quarterly operating profit came in at approximately ¥155.21 billion (about $998.5 million), well below analysts' average estimate of ¥180.7 billion. Although quarterly sales surged more than 80% to ¥806.32 billion, operating profit growth was limited to 23%, also falling short of expectations, with operating margins significantly compressed. This performance gap has raised investor concerns about the company's profitability, with a key focus on soaring memory component costs and a low-price strategy in the Japanese market eroding the new hardware's already thin margins.
Nintendo's outlook indicates that soaring procurement costs for core memory components, driven by intense competition for chip production capacity from AI data center construction, are a central factor behind the Switch 2's "revenue growth without profit growth" dilemma. Despite strong console sales, hardware margins have been severely eroded. Additionally, the company's low-price strategy in Japan has further diluted profits. The company maintained its full-year guidance and hardware sales target (19 million units expected from its June launch through the end of March), which the market has interpreted as conservative.
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