Who’s to blame for the GPU pricing crisis? Everyone

Graphics cards have been impossibly expensive for over a year now. It’s a problem that could drive gamers to consoles, stifle the do-it-yourself PC industry, and hamper start-ups hoping to use GPUs for research.

The GPU drought may not be a passing fad, either. High pricing has left everyone pointing fingers, from gamers, to retailers, to the manufacturers themselves. It’d be comforting to think that a single greedy business might be blamed for the problem, but the reality is more complex, and worrisome for anyone who hopes to buy a reasonably priced video card.

Timeline of a crisis

Let’s get right to the facts. Most graphics cards sold today are selling for above the manufacturer’s suggested retail price, and that’s been true for the past year.

Get your weekly teardown of the tech behind PC gaming

ReSpec

Subscribe

Check your inbox!

Privacy Policy

We first began reporting on the problem back in mid-2017 when we noted prices for graphics cards had begun to skyrocket. It was particularly noticeable with the new RX 500 series cards which had only just launched in April. An RX 580 which debuted at $230 could cost you as much as $700 at some retailers. Similar problems were faced by those looking to buy RX 570, and even RX 560 cards. Nvidia wasn’t immune, either. While its high-end cards were only seeing small price rises, the GTX 1060 and 1070 were often at least 50 percent more expensive than they should be.

Somehow, those problems became even worse in the months that followed. Alongside mid-range card pricing explosions, entry-level and high-end cards also ramped up in price. By January 2018, A GTX 1060 which launched at $200 could cost as much as $800. The GTX 1080 Ti, which debuted at $700, could sell for more than $1,200.

AMD’s new flagship cards, the Vega 56 and 64 — which debuted in August four months prior — jumped from launch prices of $400-500, to more than $1,000 at most retailers. That’s if they were available at all which, usually, they weren’t.

As of April 2018, there’s perhaps a sliver of light at the end of the tunnel – but prices are still far higher than they should be. As a new generation of Nvidia graphics cards approaches on the horizon, gamers are concerned we’ll see a new generation of cards that are once again out of stock, and overpriced.

What have AMD and Nvidia done about it?

While the GPU pricing crisis has been ongoing for over a year now, responses from the two companies at the heart of the issue, AMD and Nvidia, have been vague when they’re available at all. Both promise gamers remain important to them and have stated an intent to improve supply, but the details of their efforts are scarce.

They’ve allowed global stocks to deplete to the point that this pricing problem was created in the first place, and they’ve certainly benefited from the pricing crisis. Both companies posted strong earnings in the latest quarterly reports, and overall discrete desktop graphics shipments were up near 10 percent year on year. AMD even appears to have increased its share of the add-in-board market over the past year, despite the shortages.

Unfortunately, both AMD and Nvidia refused to speak to Digital Trends for this article. Both companies sent us a statement saying they were entering a typical “quiet” period and wouldn’t be commenting on the topic of graphics card finances. That leaves us to speculate about their part to play in the GPU pricing crisis. While it’s debatable whether they could have done more to combat this crisis when it first began, the actions of each company suggest their priorities have shifted away from gamers. According to the people we’ve spoken to, those buying expensive cards in larger quantities are of more interest to both companies than the typical DIY PC builders and retail gamers.

Even companies that buy stock for sale to individual consumers are finding acquisition difficult. The head of purchasing at Overclockers UK, Andrew Gibson, told us that his company has found it increasingly difficult to get hold of graphics cards at competitive prices throughout the past year, from both manufacturers and distributors. His solution was to offer aggressive discounts to members of the site’s forum to make sure GPUs ended up in the hands of gamers. That, however, was done on his own initiative.

“What I am doing is purely and solely done by OCUK,” he said. “We’ve had no outside assistance from Nvidia, AMD, or board partners, to try and reduce prices for gamers, so we do it ourselves by buying extremely aggressive, reducing our margins etc.”

Companies that focus on selling pre-built systems don’t appear to have had quite as much of an issue. Falcon Northwest, a system builder based in Medford, Oregon, voiced more support for the manufacturers.

“We’ve got a decades long history selling Nvidia, and it’s been good to work with through the madness of the mining craze,” Falcon NW founder and president, Kelt Reeves told Digital Trends.  “[Nvidia has] people dedicated to supporting system building companies like us.  We provide it with sales forecasts for the quantities we think we’ll need for our system builds, and it’s done its best to allocate the GPUs we’ll need through the board partners and distribution.”

Large retailers have faced the same supply problems as everyone else, but they hold a different position from most. Often, they’re the storefronts that allow listing video cards at inflated prices. Amazon and Newegg don’t increase prices themselves, but they do make money off third-party sellers who use their websites to scale video cards.

One source in the PC hardware industry, who wished to remain anonymous, told Digital Trends of severe scalping in the early days of the graphics card price hikes. Specifically citing Newegg, they told us of situations where 50 or more graphics cards would be purchased from Newegg and then immediately listed at an inflated price on the same site, thereby receiving Newegg promotion, and the benefits of an official-looking listing.

“It’s like concert tickets,” our source commented, “Except imagine Ticketmaster owned Stubhub, and Stubhub was just a reseller on Ticketmaster’s own website.” Newegg did not reply to Digital Trends’ request for comment. Newegg has recently implemented purchase limits on video cards to curtail this practice.

Amazon, meanwhile, is arguably more transparent when identifying third party sellers, which makes the difference between first-party listings and vendor listings more obvious. However, Amazon has no sales limit for video cards, so nothing stops scalpers buying everything they can find.

Selling cards down the mines

While Nvidia and AMD said they were putting gamers first, they don’t seem to have qualms about other industries buying up large stocks of cards. While certain retailer purchase limits might stall individuals gaming the system, that doesn’t stop companies who buy directly from the manufacturers or add-in-board partners.

Indeed, it may even be that AMD, Nvidia, and their partners have been giving preferential treatment to cryptocurrency mining hardware companies due to their volume purchases. During our chat with mining rig builder Easy Crypto Hunter earlier this year, Digital Trends was told the company had little difficulty buying large quantities of cards.

“Commercially we’re at a different scale,” explained founder, Josh Riddett, who told us that his company alone buys several hundred graphics cards a month. No wholesaler, retailer or manufacturer had shown any interest in limiting his number of purchases either. Although prices have gone up for him too, he said he frequently sees favorable rates for buying in bulk.

Edgar Bers, the head of business development and communications at cloud mining company HashFlare, told us his firm buys hundreds of AMD 400, 500 and Nvidia GTX 1060 cards a month. While it sources its cards from Estonian retailers, he did say that his company regularly secured discounts for the bulk purchases, and never had any problems with supply – even if the prices had gone up in recent months.

Despite this, AMD and Nvidia claim that cryptocurrency miners have made little difference to their bottom line. AMD released a statement reiterating numbers released during its Q4 2017 earnings call, that “annual revenue related to Blockchain was approximately mid-single digit percent in 2017.” Nvidia CEO Jensen Huang said in a recent chat with TechCrunch that cryptocurrency mining attributed to a small percentage of Nvidia’s overall business.

Gamers come third

Another pressure on Nvidia’s graphics card business is machine learning. If you watched CEO Jensen Huang’s keynote at the GDC earlier this year, you’d be forgiven for thinking that Nvidia was an AI hardware developer. Its recent financial report made it sound like one, too. The first graphics card it debuted for its new Volta generation was the Titan V, a multi-thousand dollar card that was designed to facilitate machine learning and AI development, far more than it is to push additional pixels through to your new 4K display. AMD is also working on AI hardware, with an ongoing partnership with Tesla to power the AI in its self-driving cars and the hint of a new, AI-focused Vega card on the horizon.

With this pivot by both companies towards AI development, gamers are once again sharing the global stock of graphics cards with a burgeoning industry. A seeming confession from Russian bank, Sberbank, appeared online in late 2017, which claimed that it had been buying up masses of GPUs for AI research. It claimed that that was the main reason for shortages in Russia, and associated price hikes.

That kind of purchasing may be replicated in western markets. Forbes released a report in September 2017 which suggested a sizeable portion of Nvidia’s “gaming” sales were down to machine-learning and data-center companies buying gaming graphics cards for their own AI development purposes.

It suggested that gaming graphics cards were far cheaper, and often performed better, than existing server-grade chips. The report cited AI start-up Clarifai as a major proponent of using Titan graphics cards, often overclocked to achieve higher levels of performance, for its goals. Clarifai’s CEO, Matt Zeiler, even suggested that Nvidia has entirely new targets in mind when it comes to its hardware in the near future. “If you look back a few years ago, Nvidia was just a gaming company,” Zeiler told Forbes. “They’ve completely shifted to machine learning.”

That’s certainly been the case over the last year. The combination of AI and cryptocurrency purchases providing a rapidly increasing demand, and rabid retailers (both first and third-party) only too happy to capitalize on the trend, drove prices to unprecedented levels. While prices have subsided some in recent months, these trends give reason to fear they won’t return to normalcy soon.

If even large retailers dedicated to these audiences have struggled to get the stock they need, it seems likely that problems will continue for gamers in the future – especially as automotive adoption of AI looks set to explode in the next few years.

While supply may one day catch up with demand, and pricing may return to some semblance of normality, gamers will need to wait for that day to come. Even if it does happen, one thing’s for certain —  gamers are no longer the only child of graphics card companies. They are going to have to learn to share.