"Moore's Law is dead," says Nvidia CEO Jensen Huang, justifying game card price hike

“Moore’s Law is dead,” says Nvidia CEO Jensen Huang, justifying game card price hike

Nvidia Corp. Chief Executive Jensen Huang said Wednesday he thinks it will be “a pretty fantastic fourth quarter for Ada,” the company’s next-generation chip architecture unveiled this week, even as critics balk at a price increase during a weakening of consumer demand. .

nvda,
+0.65%
expects high demand for gaming chips using its next-generation “Ada Lovelace” chip architecture, named for the 19th-century English mathematician generally regarded as the world’s foremost computer programmer for her work on the theoretical analytical engine of Charles Babbage.

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

Complaints circulated online about the unexpected price increase. For the respective class of chip, the 4090 is priced 7% higher than the 2020 launch price of the 3090 it is meant to replace. (As for the 3090, an upgraded version of the original was $1,100 at Best Buy with an advertised price drop of $900.) Even more surprising, the 4080 is priced 29% higher than the 3080’s 2020 launch price.

Lovelace succeeds Ampere, which was introduced in May 2020, roughly two months into the COVID-19 pandemic, amid strong demand for gaming cards. Amp-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 cut its outlook not just once, or twice, but three times and said $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 clean up Ampere-based inventory prior to Lovelace’s launch.

Read: Nvidia’s ‘China Syndrome’: Are Stocks Melting?

“We are selling very, very specifically in the market much lower than what is being sold outside the market, a significantly lower amount than what is being sold outside the market,” Huang said. “And I hope that by the fourth quarter period, sometime in the fourth quarter, the channel has normalized and made room for a big launch for Ada.”

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

“A 12-inch [silicon] wafer is much 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 for the same cost, or the same performance, half the cost, every year and a half, is gone. It’s completely gone, so the idea that a chip is going to go down in cost over time, unfortunately, is 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 completely over.”


— Jensen Huang, CEO of Nvidia

Nvidia continues to develop software

That’s why, over the years, Nvidia has developed such an entrenched software ecosystem for its chips that it’s led some analysts to start looking at Nvidia as a rapidly emerging software company.

This time around, Huang introduced 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 experiment with. metaverse apps.

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

Seeing that Nvidia is essentially offering 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 if any The use of purchased physical GPU hardware is replaced by cloud-based subscription services.

Read: Nvidia sales forecast falls about $1 billion below expectations, stocks slide

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

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

“In a factory raw materials come in and something comes out,” Huang said. “In the future, factories are going to receive data and what will come out will be intelligence, models.”

As far as factories are concerned, Nvidia must be able to have options to serve all customers of scale. “Start-ups would rather have things on opex,” Huang said. “Large, established companies would prefer to have things in capex.”

Over the years, Nvidia has shown that it is not resistant to transformation, going from being that gaming chip company to becoming the largest US chipmaker by market capitalization after game designers data centers discovered that Nvidia’s graphics processing units, or GPUs, didn’t just make video games prettier, their parallel processors were very useful in machine learning.

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

Read: The end of single-chip wonders: why Nvidia, Intel, and AMD valuations have been in such turmoil

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

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

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

As for the Ampere run, Nvidia’s stock price has declined 4.7% since September 1, 2020, when Nvidia introduced its RTX 3000 series Ampere-based gaming chips, vs. a 9.3% gain for the S&P 500 during that period.

FactSet/MarketWatch

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