Last weekend, EVGA, a key supplier and reseller for Nvidia’s (NVDA) graphics card, exited the market. It
blamed a toxic relationship with Nvidia as one of the reasons to exit the GPU market completely. To
Nvidia’s credit, EVGA likely accumulated excess inventory as prices fell and industry supply rose.
Last week, Nvidia announced the RTX 40 series. At first, the stock rallied to nearly $140. After
scrutinizing the line-up, the product failed to justify NVDA stock valuations. Shares traded at a 37 times
forward price-to-earnings multiple at a $125.50 stock price. Investors could buy AMD (AMD) at a 16x
forward P/E instead.
Dismissed by Nvidia, AMD’s RX 7000 GPU could threaten Nvidia’s dominance. Consumers are conscience
about prices. Inflation limits their budget. Unfortunately for consumers, Nvidia’s CEO insists on
sustaining pandemic-level prices. In that period, Ethereum required GPUs for mining. Stuck at home and
collecting a stimulus, demand for GPUs rose.
In November, AMD might have a compelling price/performance offering. Intel is already set to release a
mainstream GPU that is comparable to Nvidia’s RTX 3060.
Consumers will likely demand an RTX 3060 level card. This is at a fair price for its performance. AMD’s RX
7000 only needs to sell at around 25% below Nvidia’s price level. That should increase its GPU market
share. This would pressure NVDA stock to under $100.
