Nvidia Corp. Chief Executive Jensen Huang said Wednesday he thinks it’s going to be “a pretty great Q4 for Ada,” the company’s next-generation chip architecture unveiled this week, even as critics reject a price hike amid a weakening consumer demand.
expects high demand for gaming chips using next-generation “Ada Lovelace” chip architecture, named after the 19th-century English mathematician widely regarded as the world’s first computer programmer for her work on Charles Babbage’s theoretical analytic engine .
A little bit of sales will hit the current quarter as Nvidia’s $1,599 flagship RTX 4090 goes on sale October 12, with other cards like the $899 mid-tier 4080 to follow, taking the “vast majority” of launch. place in the January-ending fiscal fourth quarter, Huang said.
Complaints about the unexpected price hike were circulating online. For the respective chip class, the price of the 4090 is 7% higher than the 2020 launch price of the 3090 it is supposed to replace. (As for the 3090, an upgraded version of the original cost $1,100 at Best Buy in an advertised price drop of $900.) Even more striking, the 4080 is 29% higher than the 2020 launch price of the 3080.
Lovelace succeeds Ampere, which was unveiled in May 2020, about two months after the COVID-19 pandemic, amid strong demand for game cards. Ampere-based game cards were introduced in September 2020.
Huang certainly paid for that optimism in the form of two-quarters of “really hard medicine” after the chipmaker lowered its outlook not just one or two, but three times, saying its $400 million sale is now in the air because of a US ban on the sale of data center products to China and a $1.22 billion fee to clear Ampere-based inventory ahead of Lovelace’s launch.
Read: Nvidia’s ‘China Syndrome’: Is the Stock Melting?
“We’re selling very, very specific to the market, much lower than what’s being sold from the market, a significant amount lower than what’s being sold from the market,” Huang said. “And I’m hoping that by the fourth quarter, sometime in the fourth quarter, the channel would have normalized and made room for a great launch for Ada.”
Speaking to critics, Huang said he thinks the higher price is justified, especially since the advanced Lovelace architecture is needed to support Nvidia’s expansion into the so-called metaverse.
“A 12-inch [silicon] wafer is a lot more expensive today than yesterday, and it’s not a little more expensive, it’s a ton more expensive,” said Huang.
“Moore’s law is dead,” Huang said, referring to the standard that the number of transistors on a chip doubles every two years. “And the ability of Moore’s Law to deliver twice the performance at the same cost, or at the same performance, half the cost every year and a half, is gone. It’s all over, so the idea of a chip going down in price over time is sadly a thing of the past.”
“Computerization is not a chip problem, it’s a software and chip problem,” Huang said.
“ “Moore’s Law is dead… It’s all over.””
Nvidia continues to grow software
That’s why Nvidia has developed such an ingrained software ecosystem for its chips over the years that it has prompted some analysts to view Nvidia as a rapidly emerging software company.
This time, Huang unveiled a major expansion of the company’s so-called metaverse platform with Nvidia Omniverse Cloud, the company’s first Software-as-a-Service and Infrastructure-as-a-Service product, for designing, publishing, operating and experiencing metaverse applications.
Another push in SaaS is Nvidia’s NeMo and BioNeMo cloud AI services with a large language model. LLMs are machine learning algorithms that use huge text-based data sets to recognize, predict, and generate human language. While NeMo is the general model service, BioNemo specializes in applying LLMs to biological and chemical research.
Considering that Nvidia is essentially offering an RTX 3080 gaming chip-as-a-service with its GeForce NOW Priority service dropping in November and charging subscribers $99.99 for six months of RTX 3080 gaming chip performance, it asked MarketWatch Huang whether he will ever replace the use of purchased, physical GPU hardware with cloud-based subscription services.
Read: Nvidia Sales Forecast Drops About $1 Billion Below Expectations, Inventory Drops
“I don’t think so,” Huang said. “There are customers who want to own and there are customers who want to rent.”
“Some people prefer to outsource the factory,” Huang said. “And remember, artificial intelligence is going to be a factory, it’s going to be the most important factory in the future.”
“A factory has raw materials coming in and something coming out,” Huang said. “In the future, the factories will let data come in, and what comes out will be intelligence, models.”
As for factories, Nvidia should be able to have options to serve all large-sized customers. “Startups prefer to have things in opex,” Huang said. “Large, established companies prefer things in capex.”
Over the years, Nvidia has shown it can’t withstand transformation, from that gaming chip company to the largest U.S. chip maker by market capitalization after data center designers discovered that Nvidia’s graphics processing units, or GPUs, didn’t just make video games more beautiful, their parallels. processors were very useful in machine learning.
Several other technical hardware companies, such as Cisco Systems Inc. CSCO,
and International Business Machines Corp. IBM,
have all but transformed over the years and to varying degrees of resistance and enthusiasm into software and service companies as more companies migrate their data to the cloud instead of keeping it on-premises on their own server.
Read: The end of the single-chip wonders: why Nvidia, Intel and AMD valuations have undergone a massive upheaval
Of the 43 analysts covering Nvidia, 31 have a buy-grade rating, 11 a hold rating and one has a sell rating. Of those, 13 lowered their price targets, resulting in an average price target of $202, down from a previous $202.51.
Shares closed 0.7% higher at $132.61 on Wednesday, against a 1.7% drop by the S&P 500 index SPX,
Over the year, Nvidia shares are down 55%, compared to a 36% drop by the PHLX Semiconductor Index SOX,
a 20% drop from the S&P 500 index SPX,
and a 28% drop for the tech-heavy Nasdaq Composite Index COMP,
As for the Ampere run, Nvidia’s stock price is down 4.7% since September 1, 2020, when Nvidia unveiled its RTX 3000 series Ampere-based gaming chips, versus a 9.3% gain by the S&P 500. in that period.