The CEO of Nvidia Corp. Jensen Huang on Wednesday said he thinks it will be a “pretty great Q4 for Ada,” the company’s next-generation chip architecture unveiled this week, even as critics balk at raising prices amid softening consumer demand.
Nvidia
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expects high demand for gaming chips using the next generation ‘Ada Lovelace’ chip architecture, named after a 19th-century English mathematician is generally considered the world’s first computer programmer because of her work on Charles Babbage’s theoretical Analytical Engine.
A small portion of sales will hit the current quarter, as Nvidia’s $1,599 flagship RTX 4090 goes on sale on October 12, with other cards like the $899 mid-range 4080 to follow, and the “bulk” of the launch will happen in late January in the fiscal fourth quarter, Huang said.
Complaints about the unexpected price hike spread across the internet. For its chip class, the 4090 is priced 7% above the 2020 launch price of the 3090 it’s meant to replace. (As for the 3090, an upgraded version of the original cost $1100 per Best buy at an advertised price drop of $900.) Even more impressively, the 4080 is priced 29% above the 3080’s 2020 launch price.
Lovelace succeeds Amperewhich was introduced in May 2020, about two months after the COVID-19 pandemic, amid strong demand for gaming cards. Ampere-based gaming cards were introduced in September 2020.
Huang certainly paid for that optimism in the form of two quarters of “really harsh medicine” after the chipmaker cut its outlook not only once, or twicebut three times and said $400 million in sales is already up in the air due to the US ban on the sale of data center products in China and a $1.22 billion Ampere-based inventory clearance fee before Lovelace launch.
Read: Nvidia’s ‘China Syndrome’: Is the stock melting?
“We very, very specifically sell into the market much lower than what is sold off-market, significantly lower than what is sold off-market,” Huang said. “And I would hope that by the Q4 time frame, sometime in Q4, the channel would have normalized and there would have been room for a great Ada launch.”
To critics, Huang said he thought the higher price was justified, especially since the cutting-edge Lovelace architecture was needed to help Nvidia expand into the so-called metaverse.
“A 12-inch [silicon] the wafer is a lot 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 by which the number of transistors on a chip doubles every two years. “And the ability of Moore’s Law to deliver twice the performance at the same price, or at the same performance, half the price, every year and a half, is over.” It’s completely over and the idea that a chip will get cheaper over time is unfortunately a thing of the past.”
“Computers are not a chip problem, but a software and chip problem,” Huang said.
“ “Moore’s Law is dead… It’s completely over.”“
Nvidia continues to grow the software
That’s why over the years Nvidia has developed such an established software ecosystem for his chips which he has suggested some analysts to start looking at Nvidia as a fast-growing software company.
This time, Huang revealed 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, for designing, publishing, operating and experiencing metaverse applications.
Another push towards SaaS is Nvidia’s NeMo and BioNeMo cloud services with a big language model. LLMs are machine learning algorithms that use massive text data sets to recognize, predict, and generate human language. While NeMo is the general model service, BioNemo specializes in the application of LLMs in biological and chemical research.
Seeing as Nvidia is essentially offering an RTX 3080 gaming chip-as-a-service with its GeForce NOW Priority service, which dropped in November, charging subscribers $99.99 for six months of RTX 3080 gaming chip performance, MarketWatch asked Huang if he ever envisions using purchased physical GPU hardware that is being replaced by cloud-based subscription services.
Read: Nvidia sales forecast falls about $1 billion below expectations, shares fall
“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 prefer to move the factory out,” Huang said. “And don’t forget that artificial intelligence is going to be a factory, it’s going to be the most important factory of the future.”
“Into a factory, raw materials go in and something comes out,” Huang said. “In the future, factories will have data coming in, and what will come out will be intelligence, patterns.”
When it comes to factories, Nvidia should be able to have options to serve all customers at scale. “Startups would rather have things in operating expenses,” Huang said. “Big, established companies would prefer to have things in capex.”
Over the years, Nvidia has shown itself to be impervious to transformation, going from a gaming chip company to the largest U.S. chipmaker by market capitalization after data center designers discovered that Nvidia’s graphics processing units, or GPUs, they 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.
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and International Business Machines Corp.
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over the years, and with varying degrees of resistance and enthusiasm, have practically morphed out of necessity into software and services companies as more and more businesses migrate their data to the cloud instead of keeping it on-premise on their own server.
Read it: The End of Single-Chip Wonders: Why Nvidia, Intel, and AMD’s Ratings Have Taken a Big Upheaval
Out of 43 analysts covering Nvidia, 31 have a buy rating, 11 have a hold rating and one has a sell rating. Of those, 13 lowered their price targets, resulting in an average price target of $202, down from the previous $202.51.
Shares closed Wednesday up 0.7% at $132.61, compared with a 1.7% decline in the S&P 500
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Nvidia shares have fallen 55% for the year, compared with a 36% drop by the PHLX Semiconductor Index
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20% decline from the S&P 500 index
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and a 28% drop for the tech-heavy Nasdaq Composite Index
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As for the Ampere series, Nvidia’s stock price is down 4.7% since September 1, 2020, when Nvidia unveiled its RTX 3000 series of Ampere-based gaming chips, versus a 9.3% rise in the S&P 500 during this period.
FactSet/MarketWatch