The worldwide chip bottleneck, which has hampered production of everything from smartphones to autos, might be ending sooner than expected if graphic chip costs fall sharply. This will be a key problem for firms reporting earnings this week.
As Intel, Qualcomm, and many others report, traders will analyse the impact of inflation, China’s COVID shutdown, and the Ukrainian invasion on semiconductor supply chains.
Low graphics processing unit (GPU) prices are the catalyst, and they’re now being used in non-gaming applications as well.
Nvidia’s stock was recently downgraded to “neutral” by analysts at Baird following a dip in pricing. So far this year, shares of Nvidia and competitor Advanced Micro Devices have declined by approximately 31% and 37%, respectively, while the Philadelphia Semiconductor Index has fallen by about 22%. Both corporations refused to comment on the matter.’
Nevertheless, a slight premium is being charged for graphics processing units (GPUs). There is a 41% drop in the markup above MSRP, according to Susquehanna analyst Christopher Rolland, who made the announcement earlier this month.
Pricing of Radeon RX6000 & Nvidia’s GeForce RTX30 for gaming have declined gradually to less than 20% above MSRP from 80% at the beginning of the year, according to 3DCenter.com, which analyses European graphics chip prices.
GeForce graphics cards of Nvidia are still mostly out of stock at stores including BestBuy and Newegg Commerce, according to recent Reuters checks.
Analyst Tristan Gerra of Baird Securities told Reuters that if chip buyers believe prices will continue to fall, they would reduce their stockpiles, further reducing purchases and driving down prices.
Analysts predict that the current need for graphics processors used to power cryptocurrency mining equipment will decline when Ethereum, the cryptocurrency, changes its operation later this summer, cutting demand for GPUs.
There is a question as to whether the decreased pricing will permeate across the semiconductor industry. Kinngai Chan, an analyst at Summit Insights Group, anticipates the supply of other chips built on older machines to suffer over-capacity in the later part of this year as a result of softening demand from the PC and cellphone markets for leading edge processors including CPUs as well as some memory chips.
However, Bank of America has kept its “buy” recommendation for Nvidia, saying that the company’s downturn in the gaming and cryptocurrency mining industries might be offset by increase in the demand for graphic processors in data centres.
As a result, major chipmakers, such as Intel and TSMC, are announcing multi-billion dollar expansions.
For over 40 years, ChipInsights’ Dan Hutcheson has tracked supply and demand in the semiconductor industry and predicted a glut that would affect more than just graphics chips. “We warned we saw a glut coming,” said Dan Hutcheson, who now has followed supply and demand for chips for over 40 years.