‘Death of Moore’s Law’, says Nvidia CEO Jensen Huang as justification for price increase on game cards

Nvidia Corp. CEO Jensen Huang said Wednesday he thinks it will be “a pretty great Q4 for Ada,” the company’s next-generation chip architecture unveiled this week, even as critics wonder about a price hike during a declining consumer demand.

Nvidia NVDA,
+0.65%
expects strong demand for gaming chips using its next-generation “Ada Lovelace” chip architecture, named after the 19th-century English mathematician generally considered the world’s first computer programmer for her work on Charles Babbage’s theoretical analytical engine.

A bit of sales will hit the current quarter, as Nvidia’s flagship RTX 4090 at $1,599 goes on sale on October 12, with other cards like the $899 mid-tier 4080 to follow, and the “vast majority” of launches taking place in late January fiscal fourth quarter, Huang said.

Complaints circulated online about the unexpected price hike. For its respective chip class, the 4090 is priced 7% above the 2020 launch price of the 3090 it is intended to replace. (As for the 3090, an upgraded version of the original went for $1,100 at Best Buy in an advertised price drop of $900.) Even more striking, the 4080 is priced 29% above the 2020 launch price of the 3080.

Lovelace succeeds Ampere, which was unveiled in May 2020, about two months into the COVID-19 pandemic, amid strong demand for playing cards. Ampere-based game cards were introduced in September 2020.

Huang has certainly paid for that optimism in the form of two-quarters of “really tough medicine” after the chipmaker lowered its outlook not just once or twice but three times, saying $400 million in sales is now up in the air due to a US ban on selling data center products to China and a $1.22 billion charge to clear Ampere-based inventory ahead of the launch of Lovelace.

Read: Nvidia’s ‘China Syndrome’: Is the stock melting down?

“We are very, very specifically selling into the market much lower than what is selling out of the market, a significant amount lower than what is selling out of the market,” Huang said. “And I would hope that within the Q4 time frame, sometime in Q4, the channel would have normalized and that would have made way for a great launch for Ada.”

To critics, Huang said he feels the higher price is justified, especially since the cutting-edge Lovelace architecture is needed to support Nvidia’s expansion into the so-called metaverse.

“A 12-in [silicon] wafer is much more expensive today than it was yesterday, and it’s not a little bit more expensive, it’s a ton more expensive,” Huang said.

“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 for Moore’s Law to deliver twice the performance at the same price, or at the same performance, half the cost, every year and a half, is over. It’s completely over, and so the idea that a chip comes to falling in cost over time is unfortunately a thing of the past.”

“Computing is not a chip problem, it’s a software and chip problem,” Huang said.

“Moore’s Law is dead … it’s all over.”


— Nvidia CEO Jensen Huang

Nvidia continues to develop software

That’s why, over the years, Nvidia has developed such an entrenched software ecosystem for its chips that it has led some analysts to begin viewing Nvidia as a fast-growing 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, to design, publish, operate and experience metaverse applications.

Another push into SaaS is Nvidia’s NeMo and BioNeMo store-language model cloud AI services. LLMs are machine learning algorithms that use massive text-based datasets to recognize, predict and generate human language. While NeMo is the general modeling service, BioNemo specializes in applying LLMs to biological and chemical research.

Since Nvidia essentially offers an RTX 3080 gaming chip-as-a-service with its GeForce NOW Priority service that dropped in November, charging subscribers $99.99 for six months of RTX 3080 gaming chip performance, MarketWatch asked Huang , whether he ever foresees the use of purchased physical GPU hardware being replaced by cloud-based subscription services.

Read: Nvidia’s sales forecast falls about $1 billion below expectations, stock falls

“I don’t think so,” Huang said. “There are customers who want to own and there are customers who like to rent.”

“Some people would rather outsource the factory,” Huang said. “And remember, artificial intelligence will be a factory, it will be the most important factory in the future.”

“A factory has raw materials come in and something comes out,” Huang said. “In the future, factories will get data in and what will come out will be intelligence, models.”

As far as fabs go, Nvidia needs to be able to have capabilities to serve all scale customers. “Startups would rather have things in opex,” Huang said. “Large, established companies would rather have things in investment.”

Over the years, Nvidia has shown it is not immune to transformation, moving from a gaming chip company to become the largest U.S. chip maker by market capitalization after data center designers found that Nvidia’s graphics processing units or GPUs didn’t. just make video games more beautiful, their parallel processors were very useful in machine learning.

Several other technical hardware companies, such as Cisco Systems Inc. CSCO,
-2.33%
and International Business Machines Corp. IBM,
-1.08%,
have over the years, and with varying degrees of resistance and enthusiasm, almost out of necessity transformed into software and service companies as more companies migrate their data to the cloud instead of keeping it locally on a proprietary server.

Read: The end of one-chip wonders: Why Nvidia, Intel and AMD’s valuations have seen massive upheaval

Of the 43 analysts covering Nvidia, 31 have a buy rating, 11 have a hold rating and one has a sell rating. Of those, 13 cut their price targets, resulting in an average target price of $202, down from $202.51 previously.

Shares closed Wednesday up 0.7% at $132.61, versus a 1.7% drop in the S&P 500 index SPX,
-1.71%.

Over the year, Nvidia shares have fallen 55%, compared with a 36% decline in the PHLX Semiconductor Index SOX,
-0.97%,
a 20% drop in the S&P 500 index SPX,
-1.71%,
and a 28% drop for the tech-heavy Nasdaq Composite Index COMP,
-1.79%.

As for the Ampere run, Nvidia’s stock price is down 4.7% since September 1, 2020, when Nvidia unveiled its Ampere-based RTX 3000 series, versus a 9.3% gain by the S&P 500 over that period.

FactSet/MarketWatch

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