NVIDIA Wows Gamers with Next-Gen Line of Monster Chips
In the future, video games will have stunning, photorealistic 8K graphics, so NVIDIA Corp. (Nasdaq: NVDA, Rated “B-”), the maker of best in class graphics processors, is getting ready for that future now.
It’s a boon for shareholders.
On Tuesday, the Santa Clara, Calif.-based company unveiled a monster graphics processing unit, or GPU, based on the same architecture that powers supercomputers. The new GPU is known as the RTX 3090 and it’s specifically designed to render video games.
Cutting edge is a big deal in gaming culture because it sells units.
And that’s the goal. Video gaming, despite its popularity, is still vastly misunderstood by the mainstream. It’s a really big business with extremely bright prospects that have been enhanced by the pandemic.
For example, when NVIDIA reported Q2 financial results in August, its gaming business produced $1.65 billion in sales, up 26% year-over-year. That’s for one quarter! And the business is only getting bigger as gaming replaces movies and sports viewing for many.
There is another driver for this success: The games are getting better due in large part to advances made by companies like NVIDIA. Its CUDA software codebase and cutting-edge hardware are making fully path-traced photorealistic graphics common place. This means gamers see all of the reflections, textures and light tracing you would expect to see in real life.
Except gameplay is often better than real life because every computer-generated scene is spectacularly well lit, vivid and framed by the eyes of artists. The new RTX 3090 hardware takes these beautiful images to a new level.
Related post: NVIDIA Could Be Big Automakers’ Tesla Killer
In May, CEO Jensen Huang showed off the latest NVIDIA GPU. The Quadro RTX 8000 was capable of running graphics at 25 fps at a 720p resolution. When engineers enhanced the hardware, they were able to get to 30 fps at 1440p resolution.
And now the bar has been raised even further because the RTX 3090 is capable of running graphics at 60 fps at full 8K.
While these numbers might not mean much to you, for context, that is 16 times the pixels of 1080p. A professional gamer watching the demo Tuesday said he could see the wear and tear on the tire treads of rendered racecars. It’s the kind of visceral experience that will create a buzz and help sell a lot of expensive new equipment.
Based on what Huang calls the “big ferocious GPU,” the RTX 3090 will cost a whopping $1,499. This is bleeding edge gear built on the latest 8N manufacturing process with 28 million transistors, so it’s priced accordingly.
The RTX 3080, a notch down the GPU pecking order, will run games at 60 fps at 4K resolution for a cost of $699. And the RTX 3070, still twice as fast as last year’s GPU, will clock in at $499.
These are high-margin products aimed at gamers, but the processing power is certain to attract game developers, film editors and design engineers. It’s the magic of NVIDIA.
Although its high-end GPUs were first aimed at gamers, the company has been reborn as a maker of gear for problem solvers.
Part of this is because of CUDA software. Another part is because of the super-speed hardware. The combination is robust enough to run artificial intelligence code, and a lot of NVIDIA hardware is ending up as an integral part of AI systems in academia and data centers. During Q2, data center sales surpassed gaming revenues for the first time ever.
Related post: NVIDIA Emerges out of Trade-war Shadow
The opportunity for investors is timing. The gaming business is booming, goosed by COVID-19 and cultural changes. The data center business is thriving because NVIDIA’s GPUs scale well and have a terrific reputation. Another positive is those businesses are using the same architectures, bringing efficiencies.
NVIDIA shares added 3% Tuesday, pushing it to a record high. Currently, shares are trading around $574. The stock now trades at 50 times forward earnings and 25 times sales. While these metrics may seem extreme, keep in mind the prospects for gaming and data center sales remains very bright.
Based on sales growth alone, shares could easily trade at $650, around 17% above current levels, over the next six months. Traders should buy NVIDIA into weakness.
Best wishes,
Jon D. Markman
