Nintendo (NTDOY) stock has declined by over 17% in the past month due to surging memory chip costs. RAM prices have seen a meteoric rise in just the past few months due to AI demand. Many investors believe Nintendo can suffer from this, as this can compress the margins on its Switch 2 consoles.
Unexpectedly, this has been named as one of the best buys for 2026 by certain analysts. Barron's columnist Tae Kim believes that NTDOY is one of the best tech stocks you can buy for 2026.
Again, this comes despite Nintendo facing tariffs, rising prices for all sorts of electronics, and consumers showing signs of weakening.
The Columnist's Argument for NTDOY Stock
Barron's has been consistently bullish on Nintendo throughout 2025 and expects the stock to outperform estimates even though Nintendo will be absorbing higher production costs by not changing its pricing. This is because they expect strong Switch 2 performance, with Nintendo raising its Switch 2 sales forecast from 15 million to 19 million units for fiscal 2026, with 10.36 million units sold as of Sept. 30. The console's performance has “far exceeded market expectations,” according to Toyo Securities analyst Hideki Yasuda.
The argument is that higher sales volumes will compensate for the margin compression. Moreover, Nintendo is seeing strong software sales. Pokémon Legends: Z-A sold 5.8 million units in its first week. This is a game that costs anywhere from $60 to $70.
Wall Street is Still Selling Nintendo
Wall Street is not blind to the strong sales volumes of the Switch 2, but electronic components getting more expensive can turn into a bigger headache for the company next year. Gaming consoles include components that are also in demand for AI uses, and this can cause costs to swell if demand remains strong.
NTDOY stock gained over 70% from the start of 2025 to its peak this year in August 2025. The current selloff has not wiped out NTDOY's gains, and it is still up 21% year-to-date (YTD). Investors have taken profits as they believe it's a good idea to do so before component costs climb higher.
The only way Nintendo will be able to reverse this trend would be to show that it can deliver strong console sales continuously and offset any costs from rising RAM and chip prices.
Should You Buy the Dip or Sell NTDOY Stock Now?
Even if Nintendo continues to do well with sales volume, it may not be able to hold up its financials. The Switch 2 console needs to be sold at a positive net margin. If not, software sales need to recoup any losses and do so quite fast before the market sees any red ink.
The consensus is that Nintendo is selling the Switch 2 with a positive, but very slim, profit margin. SG&A expenses rose by 29% year-over-year (YoY) in Q2 2026, but EBITDA also rose by 13%.
Nintendo's ordinary profit was boosted by FX gains versus FX losses last year, and it also recorded a gain on the sale of investment securities.
Still, Nintendo has been able to handle the price increases, perhaps because it has long-term contracts with its suppliers that may be dampening the impact.
Things can get a lot worse before they get better. If game sales slow down and chip prices continue to rise, it can knock down NTDOY stock much more. And if the AI rally craters and Nintendo's Switch 2 manufacturing costs get cheaper, it can still hurt the company, as consumers will get much weaker, as the economy's growth rests mainly on AI today.
All things considered, I would take profits.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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