We see two reasons for Nvidia's dramatic price hikes on its newly unveiled graphics cards

Published Wed, Sep 21 20223:07 PM EDTUpdated Wed, Sep 21 20223:07 PM EDT

A top complaint coming out of this week's Nvidia GTC conference is sticker shock over the company's newly unveiled 40 series graphics processing units for video gamers and creators. Some of the online criticism suggests that pricing could give rival Advanced Micro Devices (AMD) a chance to win on the price-to-performance front. We'll get a look at AMD's latest offerings on Nov. 3. Others noted they will go for the now discounted Nvidia 30 series. Still, others who complained concluded that in the end, they will pony up in order to have whatever is the most cutting-edge GPUs on the market. As long-term believers and long-time holders of Nvidia (NVDA) in the Club portfolio, we see two reasons why the company would raise prices so dramatically on its new cards and risk playing into the hands of AMD, which is also a Club stock. For reference, the 4080 and 4090 series chips start at $899 and $1,599, respectively. At the lower-end, that's a 28% increase over 3080's launch price in September of 2020 of $699. At the higher-end, That's a more moderate 6.7% increase over 3090's launch price of $1,499. The first reason has to do with accounting for a decades-high inflationary environment, and the second reason has to do with using the price differential to flush out excess inventory of 30 series GPUs to make room for the next-generation cards based on the just-announced Ada Lovelace architecture, which start hitting the market next month. In Tuesday's interview with Jim Cramer, Nvidia CEO Jensen Huang tried to soothe investor angst about the video gaming market, which has lately dogged the company's shares. Inflation impact Starting with inflation, core consumer prices, excluding the food and energy sectors, are pointing to a roughly 10% increase in the cost of goods since 30 series units were released two years ago. Put another way, if we were to adjust for inflation, a comparable 40 series price tag (think 2020 dollars) would be about $770 for the 4080 and $1,650 for the 4090. So, the 4090 actuall