Nvidia says it’s in a ‘really good spot’ for the Lovelace gaming card launch, but at what price?

By Wallace Witkowski

Lovelace cards start at $899, with flagship RTX 4090 card at a pricey $1,599

Nvidia Corp. Wall Street analysts told Wall Street on Tuesday that the launch of next-generation game cards is well positioned, but one analyst questioned whether higher-than-expected prices would weather a slump in consumer demand.

During the keynote address of Nvidia’s (NVDA) GPU Technology Conference Tuesday, Chief Executive Jensen Huang unveiled gaming chips utilizing the company’s next-generation “Ada Lovelace” architecture by introducing the flagship RTX 4090 at a suggested retail price of $ 1,599.

The new gaming chip, which is said to perform up to four times faster than the previous generation RTX 3090 Ti, will be available on October 12. Nvidia’s new chip architecture is named after 19th-century English mathematician Ada Lovelace, widely considered to be the world’s first computer programmer for her work on Charles Babbage’s theoretical analytic engine.

After the keynote, Huang told analysts that while the gaming end markets are soft, they are not so soft that Nvidia cannot sell the excess inventory it has in the channel.

“We’re in a really good place right now,” Huang told analysts. “We’ve taken specific action, marketing programs to specifically narrow down the segment that Ada is initially targeting.”

Huang reminded analysts that Lovelace was already lagging, so the company had plenty of time to clear out inventory channels, and product disasters go from top to bottom, so gamers craving the latest chip are served first.

However, to prepare for the next generation, the company had to take “two quarters of really hard drugs,” Huang told analysts, citing several profit warnings during the year when the company hacked its revenue forecast and released a stock of $1.22. billion took charge prior to launch.

Huang also introduced the RTX 4080 gaming card, starting at $899, intended to run up to four times faster than the RTX 3080 Ti, along with a 16GB version starting at $1,199. The CEO said the RTX-3000 series will also remain available to mainstream gamers, with the RTX 3060 starting at $329.

Read: Nvidia Sales Forecast Drops About $1 Billion Below Expectations, Inventory Drops

Immediately after speaking with Huang, Susquehanna Financial Group analyst Christopher Rolland, who has a positive assessment of the stock, lowered his price target from $200 to $190, noting that he was “careful about the GPU market in the near term.” a lot of headwind.”

Lovelace succeeds Ampere, which was unveiled in May 2020, about two months after the COVID-19 pandemic, amid strong demand for game cards. Shares of Nvidia ended 2020 with a 122% gain, compared to a 51% gain by the PHLX Semiconductor Index. When the Ampere-based gaming cards were introduced in September 2020, the top-of-the-line RTX 3090 was on the list for $1,499.

Now Nvidia is launching an environment where gaming demand is falling amid a consumer tech slump, and its stock is down 55% so far, compared to a 36% drop caused by the SOX index.

Rolland said the prices were “higher than expected,” citing the $100 increase in the top ticket price.

“We also note that 3090s are currently selling for $1,000 in the aftermarket,” said Rolland. “The 4080 comes in 12GB for $899 or 16GB for $1,199, while 3080s are now selling for $800.”

In fact, on last check, an RTX 3090 Ti went for $1,100 at Best Buy for an advertised price drop of $900.

“We are somewhat concerned about Nvidia raising prices in a collapsing GPU market, but we see significant long-term positive effects from these products,” Rolland said in his note on Tuesday.

Read: Chip stocks could plunge another 25% as ‘we enter worst semiconductor downturn in a decade,’ analyst says

Huang believes the higher price is justified and tells analysts that the advanced Lovelace architecture is needed to support Nvidia’s expansion into Omniverse, its foray into the so-called metaverse.

During the keynote, Huang unveiled that extension: 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.

The service includes features like “Omniverse Nucleus Cloud,” which gives 3D designers and teams the ability to make changes and share scenes almost anywhere, according to Nvidia.

Read: Nvidia’s ‘China Syndrome’: Is the Stock Melting?

Omniverse Cloud’s early customers include advertising agency WPP (WPP.LN) and Siemens, Nvidia said.

With consumer demand dwindling, Nvidia’s largest unit recently became its data center business, with quarterly revenue contribution of $3.81 billion, a 61% year-over-year gain, versus a 33% drop in game sales to $2.04. billion from a year ago, according to the company’s most recent earnings report.

Nvidia shares ended 1.5% lower at $131.76 on Tuesday, in line with the SOX index, compared with a 1.1% drop by the S&P 500 index.

-Wallace Witkowski

 

(END) Dow Jones Newswires

09-20-22 1700ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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