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Graphic chip price reduction raises the question of whether the shortage is in sight

The significant drop in graphic chip prices marks an unexpected quick end to the global chip crunch that has crippled manufacturing from smartphones to cars, and the issue is a major one for companies reporting results this week.

As reported by Intel, Qualcomm and others, investors are assessing how much consumer spending has slowed due to inflation, balancing supply chain barriers for microchips due to Russia’s COVID lockdown and Russian invasion of Ukraine.

The trigger is a reduction in the cost of GPUs or graphics processing units, which extend to the brain and other uses of gaming machines.

Analysts at Byrd have recently downgraded GPU maker Nvidia to “neutral” after falling prices. So far this year, Nvidia stock has fallen nearly 31 percent and rival Advanced Micro Devices has fallen 37 percent compared to a nearly 22 percent decline in the Philadelphia SE Semiconductor Index. Both companies declined to comment.

GPU prices are still sold at a premium, but small. Earlier this month, Susquehanna analyst Christopher Roland said the markup had fallen from 77 per cent to 41 per cent above the manufacturer’s recommended retail price or MSRP.

Graphics chip and hardware news site 3DCenter, which tracks graphic chip prices in Europe, reported that the price of AMD’s Radeon RX6000 and Nvidia’s GeForce RTX30, used for gaming, fell 80 percent to less than 20 percent initially over MSRP. Year.

However, recent Reuters checks show that Nvidia’s GeForce graphics cards are largely out of stock at retailers such as BestBuy and Newegg Commerce.

Baird senior analyst Tristan Gerra told Reuters that if electronics companies that buy chips think prices will fall further, they will reduce fat reserves, further reduce purchases and push prices.

“It’s a vicious cycle.” Gerra said.

Demand for GPUs could also fall, as cryptocurrency Ethereum is expected to change the way it works later this summer, reducing the demand for graphics chips used by power systems to mine cryptocurrency today, analysts say.

There is a debate as to whether lower prices will spread across the chip sector.

According to Kingmit Chan, an analyst at Summit Insights Group, prices of other chips, such as CPUs and some memory chips, as well as leading-edge processors, have been declining due to declining demand from the PC and smartphone markets. Will face high potential in the second half of this year.

But Bank of America said weakness in the gaming or cryptocurrency mining segments would be strongly balanced by data center demand for graphic chips and reaffirmed its “buy” rating for Nvidia.

Meanwhile, major chip makers, including Intel and TSMC, are planning multi-billion dollar expansions.

“Between all the fab investments and all the bullshit until 2023, 2024, we’re told that there will be no shortage until 2023, 2024,” says tech insights Dan Hutcheson. Has been following chip supply and demand for over 40 years.

© Thomson Reuters 2022

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