Summary
- Nvidia's AI revenue dwarfs its gaming earnings by a 9:1 factor.
- New data center GPUs coming annually signals a decreased focus on gaming products.
- A lack of high-end competition from AMD gives Nvidia no reason to produce standout RTX 5000 gaming GPUs.
Not even a year has passed since I wrote about GPU upgrades becoming increasingly difficult for gamers, thanks to AI bulldozing the priorities of companies like Nvidia and AMD. It seems the concerns I cited in my analysis then have materialized all too well. Nvidia's shares have been surging to no end, helping the giant break into the $2 trillion club earlier this year. It'll soon breach the $3 trillion mark as well, likely surpassing Microsoft in the process.
While Nvidia continues to rake in the "green," it becomes increasingly clear that gaming is about to take a back seat for the company. It's no secret that it pays a lot more to allocate silicon to data center GPUs than GeForce gaming GPUs. But, amid chasing record-high valuations and pleasing shareholders, gamers are about to be left in the lurch.
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AI is bringing in over $20 billion every quarter
It's getting harder to care about $2 billion gaming revenue
Nvidia's latest quarterly earnings boldly declared $22.6 billion in data center revenue, while its gaming vertical brought in only $2.6 billion. I say "only" because the company's AI earnings are clearly dwarfing anything it makes through its gaming products. Just two years ago, in Q1 2022, gaming revenues actually exceeded data center revenues by a few million dollars. That was the last time it happened. Fast forward two years, and gaming accounts for only 10% of the company's total revenue.
Charging $1,500 for an RTX 4090 pales in comparison to charging around $30,000 for a single H100 GPU.
If 90% of a company is running on AI computing chips, there's little incentive to innovate on anything else. Providing better value GeForce graphics cards to gamers has taken a firm back seat to providing more and more powerful data center superchips to Big Tech. Charging $1,500 for an RTX 4090 pales in comparison to charging around $30,000 for a single H100 GPU.
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New data center GPUs are coming every year
Another nail in the coffin for gaming GPUs
Nvidia CEO Jensen Huang mentioned in the company's recent quarterly earnings call that the company is moving to a "one-year rhythm" for its data center GPU architectures. While the company still sells its Hopper and the latest Blackwell GPUs to enterprises, it's already readying "Rubin" for a 2025 release. This is the first time the company will switch from a two-year to a one-year cadence for new GPU architectures.
With more and more focus on newer GPUs for its AI chips, who's to say GeForce GPUs will not be relegated to an afterthought?
Huang said that the company will also accelerate every other kind of chip it makes — CPUs, networking NICs, and switches. According to him, "a mountain of chips are coming." While this might signal Nvidia is increasing confidence in its AI infrastructure, it's kind of alarming for gamers. With more and more focus on newer GPUs for its AI chips, who's to say GeForce GPUs will not be relegated to an afterthought?
Once Blackwell gaming GPUs are out sometime later this year, will the company even care about significant gen-on-gen improvements for gamer-focused cards? Sky-high GPU prices are already disappointing, and RTX 5000 cards will be the same. But gamers might be in for even more disappointment as the bulk of the company's resources are allocated to improving the performance of AI chips.
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Nvidia is facing zero high-end competition
AMD might sit out the next high-end GPU segment
If the latest rumors are anything to go by, AMD's Radeon RX 8000 series will only have budget and mid-range graphics cards. Whatever AMD's reasons for doing so, if this is indeed true, Nvidia will be left with virtually no competition in the high-end segment, considering that Intel is unlikely to debut high-end cards with its Battlemage series. The lack of serious competition will leave Nvidia with no incentive to go all-out with its RTX 5000 series cards.
Nvidia will have free rein to demand exorbitant prices for its halo products, with the effects trickling down to the 80-, 70-, and 60-series cards as well.
The company already enjoys the lion's share of the discrete gaming GPU space, so an entire GPU generation without any high-end competition will only make it complacent. Consequently, gamers are unlikely to see decent price-to-performance on the Blackwell cards, not that they were getting anything close to that in the RTX 4000 series.
Nvidia will have free rein to demand exorbitant prices for its halo products, with the effects trickling down to the 80-, 70-, and 60-series cards as well.
Nvidia can't take its eyes off the AI game
Nvidia has all but transformed into an AI hardware company, moving further and further away from its gaming products, which had generated the bulk of its revenues just two years ago. With its AI GPUs receiving most of its wafer allocation and R&D resources, gaming GPUs might just become a side gig for the company sooner rather than later. Since AMD is not even planning to compete at the high-end come RDNA 4, unfortunately for us, there will probably be no reason for Team Green to offer standout gaming GPUs in the future.