Article Analysis: How much should GPUs cost vs. inflated "market" prices

[AnitaPeterson]

The Price is Wrong: This is What GPUs Should Have Cost

In this GPU analysis, we look back across the last 4 generations of graphics cards to illustrate exactly why this generation has underperformed - and by how...

www.techspot.com

Probably one of the most comprehensive deconstructions of corporate greed.
I wish there were more stories like these being written!

 

[GodisanAtheist]

Here is the TLDR:

Currently, even when accounting for inflation and generally higher prices for all goods compared to a few years ago, most current-generation GPUs are indeed overpriced by $50 to $100 compared to previous years' expectations and what consumers want in terms of performance uplift per generation.

And here is the TLDR chart:

 

[Elfear]

That analysis makes me feel a bit better about my 7800XT purchase in December. Glad I didn't "overpay" by historical standards too much.

 

[BFG10K]

It's very simple: this happens because we have a GPU monopoly. NV has 85% dGPU marketshare and an uncontested top-end, which drives the halo mind-share. It's nothing to do with inflation, component shortages, COVID, supply chain issues, or any other claptrap certain individuals dream up.

We had the same thing with Intel on 14nm++++++++++ for seven years, getting quad-cores for $1000 and +5% & new motherboard every 18 months. Intel apologists back in the day actually tried to tell us it was impossible to raise IPC any further, that's why poor lil' Intel had no choice in the matter.

Surprise, surprise, as soon as AMD CPUs became competitive again, suddenly customers got good pricing with regular IPC and core count uplift. And given Intel keeps pushing out K/S furnace monstrosities to try to compete at the high-end, we can see just how incompetent they truly were.

Yet some people appear to have no idea (tm) about any of this, yo.

 

[biostud]

It's very simple: this happens because we have a GPU monopoly. NV has 85% dGPU marketshare and an uncontested top-end, which drives the halo mind-share. It's nothing to do with inflation, component shortages, COVID, supply chain issues, or any other claptrap certain individuals dream up.

We had the same thing with Intel on 14nm++++++++++ for seven years, getting quad-cores for $1000 and +5% & new motherboard every 18 months. Intel apologists back in the day actually tried to tell us it was impossible to raise IPC any further, that's why poor lil' Intel had no choice in the matter.

Surprise, surprise, as soon as AMD CPUs became competitive again, suddenly customers got good pricing with regular IPC and core count uplift. And given Intel keeps pushing out K/S furnace monstrosities to try to compete at the high-end, we can see just how incompetent they truly were.

Yet some people appear to have no idea (tm) about any of this, yo.

Yup when the market doesn't work, due to lack of competition or lack of products, it is the buyers who pay the price.

 

[gorobei]

there is an exacerbating effect from the jacked prices/cryptobust glut/nvgreed tax.

the overproduction of ampere chips for crypto during the bust meant that they overpriced 40series to give buyers a reason to buy last gen 30 series. at the same time they produced the normal amount of 40xx chips to avoid another shortage leading to scalper situation, but had to hold any price drops until ampere cleared out of inventory. with 40super they will likely still have a good bit of inventory to clear out when 50xx series releases, meaning they may delay release or not adjust prices to avoid lowering the msrp of their 'premium branding'.
they may never get back on schedule where they can properly time the tapering off of production of last gen to match release of the new gen.

 

[Seba]

It's nothing to do with inflation

Not entirely caused by inflation, yes. But nothing to do with inflation?

When money lose value, everything is affected.

 

[BFG10K]

When money lose value, everything is affected.

Does it look like NV is losing value? No. In fact since COVID they've been astronomically gaining value.

Likewise, did Intel lose value when they were stuck at 14nm for seven years? Again, no.

Inflation is just an excuse to increase profit even further.

 

[jpiniero]

Does it look like NV is losing value? No. In fact since COVID they've been astronomically gaining value.

That's cuz of AI. Not gaming.

Also 28% inflation from 8 years ago is way too low. It's closer to like 50%+ just from the beginning of the pandemic.

 

[BFG10K]

That's cuz of AI. Not gaming.

So plenty of profit to lower GPU prices.

Also 28% inflation from 8 years ago is way too low. It's closer to like 50%+ just from the beginning of the pandemic.

Except they're still making GPU profit after a string of $50 - $100 price cuts across multiple GPUs from both vendors. Yet certain individuals were telling us launch prices were "razor thin margin".

 

[AtenRa]

Just to remind that product prices include the R&D cost which is getting higher each year.

 

[manly]

So plenty of profit to lower GPU prices.


Except they're still making GPU profit after a string of $50 - $100 price cuts across multiple GPUs from both vendors. Yet certain individuals were telling us launch prices were "razor thin margin".

Speaking of net profit margin:

NVIDIA Net Profit Margin 2010-2024 | NVDA

Current and historical net profit margin for NVIDIA (NVDA) from 2010 to 2024. Net profit margin can be defined as net Income as a portion of total sales revenue. NVIDIA net profit margin for the three months ending January 31, 2024 was <strong></strong>.

www.macrotrends.net

 

[coercitiv]

Not entirely caused by inflation, yes. But nothing to do with inflation?

When money lose value, everything is affected.

It's got nothing to do with inflation as we understand it, the one that affects the entire chain and also increases production costs. The inflation introduced by the pandemic is beyond us now, and yet companies continue to hike prices. And mind you, this applies to the economy as a whole, not just the GPU market where crypto and AI have skewed demand in such a way that consumers have even less leverage.

 

[Seba]

It's got nothing to do with inflation

Not possible.

Inflation reduces the value of money.

If inflation rate decreases, prices still rise, just not as fast as before.

That devaluing of money is permanent, unless there is deflation (negative inflation).

 

[tamz_msc]

It's got nothing to do with inflation as we understand it, the one that affects the entire chain and also increases production costs. The inflation introduced by the pandemic is beyond us now, and yet companies continue to hike prices. And mind you, this applies to the economy as a whole, not just the GPU market where crypto and AI have skewed demand in such a way that consumers have even less leverage.

View attachment 95543

All that the graph you posted shows is that CPI > PPI as an empirical fact is returning to pre-pandemic levels - i.e. things are becoming normal. CPI < PPI in the pandemic years is natural because demand cratered and consumer spending became more restrictive during that time.

And GPUs are contributing barely any weight to CPI as a fraction of the whole.

 

[coercitiv]

Not possible.

If inflation is 10% how much do average profits need to increase in order for the business sector to retain mostly the same value? Is it 30%? Read the quotes from the article below.

All that the graph you posted shows is that CPI > PPI as an empirical fact is returning to pre-pandemic levels

Click on the graph, it's linked to the source article from fortune.com. The article itself is interlinked with many others covering the topic.

Another example:

‘Greedflation’ study finds many companies were lying to you about inflation

Companies like Exxon Mobil, Shell, and Kraft Heinz enjoyed bumper profits as consumers struggled with historic inflation.

fortune.com

Inflation soared across the globe last year, peaking near 11% in the eurozone and above 9% in the U.S.
The source of that high inflation has become a well-trodden line. Analysts have typically laid the blame on supply-chain bottlenecks created by excess demand during the COVID-19 pandemic and exacerbated by Russia’s invasion of Ukraine.

Profits for companies in some of the world’s largest economies rose by 30% between 2019 and 2022, significantly outpacing inflation, according to the group’s research of 1,350 firms across the U.S., the U.K., Europe, Brazil, and South Africa.

A June study by the International Monetary Fund (IMF) found that 45% of eurozone inflation in 2022 could be attributed to domestic profits. Companies in a position to benefit most from higher commodity prices and supply-demand mismatches raised their profits by the most, the study found.

This behavior is not uniform across all business sectors, and definitely not uniform when accounting for company size. Some market actors are in a far better position to take advantage of the current situation (and probably more willing too). That being said, folks should think twice about using inflation as an excuse for price changes in the tech sector.

 

[tamz_msc]

Click on the graph, it's linked to the source article from fortune.com. The article itself is interlinked with many others covering the topic.

Let me rephrase: CPI - PPI > 0 is normal. The magnitude of the difference is lower pre-pandemic (Jan 2020) than it is now (presumably late 2023-now, as per the graph) is due to time lag between cause and effect.

The reason is that although the pandemic is behind us, the practices that companies employed during that time still hasn't normalized. Like for example, there is still a reluctance to come to the workplace instead of doing WFH - and companies are on the one hand issuing ultimatums to employees to come to office and on the other hand restructuring their workforce so that the inefficiencies are weeded out. Double standards? Yes. But you'll also have to consider stuff that has happened during the pandemic - like the AI boom - that literally made 90% of jobs in certain fields redundant overnight.

There will be some churning, but I'm not going to predict the future and bet on prices returning to what they were like before the pandemic.

My other point was about how minuscule personal computers, let alone GPUs, are a contributing factor among the over 200 items used to calculate CPI.

 

[GodisanAtheist]

Why does every discussion around inflation have to treat inflation like some sort of monolithic thing. Some items become more expensive, others stay the same price, and others become even cheaper for a ton of factors.

TV's are one of my favorite examples, cause you can get what would have been a high end $5000 TV 10 years ago for something like $500 today, it's nuts. Despite whatever the general inflation index is doing, an item like TVs have experienced a strong deflationary trend because of advanced in manufacturing, increase in output of manufactured goods, advertising schemes built into the TVs etc...

Whatever the world at large is doing, at least some part of inflated GPU prices has to do with stagnant cost per transistor, upscaling tech, competition with miners/AI, and some significant part of GPU price inflation is just "greedflation".

 

[In2Photos]

Why does every discussion around inflation have to treat inflation like some sort of monolithic thing. Some items become more expensive, others stay the same price, and others become even cheaper for a ton of factors.

TV's are one of my favorite examples, cause you can get what would have been a high end $5000 TV 10 years ago for something like $500 today, it's nuts. Despite whatever the general inflation index is doing, an item like TVs have experienced a strong deflationary trend because of advanced in manufacturing, increase in output of manufactured goods, advertising schemes built into the TVs etc...

Whatever the world at large is doing, at least some part of inflated GPU prices has to do with stagnant cost per transistor, upscaling tech, competition with miners/AI, and some significant part of GPU price inflation is just "greedflation".

There are many TV manufacturers so competition is another factor, as well as number of units sold. Not so much in the GPU world.

 

[jpiniero]

All I'm saying is if AMD doesn't get with the program, they will quit dGPUs.

 

[coercitiv]

My other point was about how minuscule personal computers, let alone GPUs, are a contributing factor among the over 200 items used to calculate CPI.

Completely agree, though I was making the point from the opposite PoV: inflation (as an index of prices) has a minuscule contribution to PC & GPU pricing, because other factors are much more important right now. Inflation would matter in a steady market, with less disturbing factors, which we haven't had in many years now.

 

[MrTeal]

All I'm saying is if AMD doesn't get with the program, they will quit dGPUs.

The GTC keynote was really interesting not so much because of Blackwell B100 itself, but because of the whole AI ecosystem Nvidia is putting together. I think AMD can continue to compete in the GPU space, but the spend Nvidia is able put into RnD for all those other ancillary bits I'm not sure AMD will be able to keep up with. The direction it goes in the next 5 years will be interesting to watch.

 

[Ranulf]

Just to remind that product prices include the R&D cost which is getting higher each year.

I'm not sure how that is the customer's problem. This was the argument for Turing's price increases, the why a 2060 6GB card was $350 vs a $250 1060. That R&D cost is usually going to be beared over several generations, of say rtx chips in this case.

 

[MoogleW]

I'm not sure how that is the customer's problem. This was the argument for Turing's price increases, the why a 2060 6GB card was $350 vs a $250 1060. That R&D cost is usually going to be beared over several generations, of say rtx chips in this case.

Rtx 20 series in general had larger than normal die sizes that Nvidia has not done again since. Especially rtx 2080ti, thats not much smaller than A100 for comparison

 

[Seba]

Why does every discussion around inflation have to treat inflation like some sort of monolithic thing.

Inflation is money losing purchase power (money losing value).

When your measuring stick (money in this case) shrinks in size, the measured object appears larger.

Product prices are influenced by many things, besides inflation (taxes, regulations, custom/import tariffs, mandatory or negotiated wage cost, subsidizing, obsolescence, natural disasters, wars, technical advancement, shipping cost, etc.).