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Intel and NVIDIA Cut Prices to Beat Back AMD

The story in both the CPU and GPU markets over the past couple of years has been the resurgence of Advanced Micro Devices (NASDAQ: AMD). The company's comeback looked like a long shot not too long ago. It was hemorrhaging cash and almost entirely uncompetitive for many years. Intel (NASDAQ: INTC) and NVIDIA (NASDAQ: NVDA) were able to dominate, with their pricing power unchecked by any real competition.

AMD has pulled off a spectacular turnaround. On the CPU side, its Ryzen PC CPUs and EPYC server CPUs, both based on Zen architecture and built using a cutting-edge manufacturing process from a third-party foundry, has Intel scrambling to preserve its market share. On the GPU side, the company is once again competitive outside of the ultra-high-end of the market.

How big of an impact is AMD having? Both Intel and NVIDIA have been forced to cut prices, something that would have been highly unusual just a few years ago.

Image source: AMD.

Intel is feeling the pressure

Tech giant Intel has already been feeling the heat from AMD's Ryzen in the PC market, especially at the high end. Part of AMD's strategy has been to launch chips with a lot of cores and dramatically lower prices per core compared to Intel's offerings.

The Ryzen 9 3950X, for example, comes with 16 cores, 32 threads, and is priced at $749. When it launched, an 18-core, 36-thread processor from Intel's X-series would set you back $1,999. Intel didn't directly cut the price of that chip, instead launching a new family of chips at much lower prices. The new 18-core, 36-thread X-series chip from Intel sells for just $979.

In the server market, Intel has opted for straight price cuts. Earlier this week, the company discontinued its M-series Cascade Lake Xeon chips, which supported 2TB of memory per chip. Alongside that move, the company slashed the price of its L-series Cascade Lake Xeon chips, which support 4.5TB of memory. The L-series now carries a markup of $3,003 over the base model, down from a markup of $7,787 before the price cut.

AMD has been slow to win share in the server chip market, but Intel's price cutting is a sign that the company is growing increasingly worried about AMD's EPYC chips. Intel may be able to maintain its dominant market share, but it will likely be at the expense of its margins.

NVIDIA reacts to the RX 5600 XT

After years of trying and failing to make a dent in NVIDIA's dominant GPU market share, AMD's has found success with its RX 5000 series of graphics cards. It launched two RX 5700 series cards last July, priced at $349 and $399, followed by low-end RX 5500 series cards for $169 and $199 late last year. The company then filled in the gap earlier this month when it announced the $279 RX 5600 XT.

AMD claimed that the RX 5600XT beat NVIDIA's GTX 1660 Ti, which shares the same price, by as much as 20% in popular AAA PC games. While AMD's numbers may be on the optimistic side, NVIDIA isn't taking any chances.

Instead of a price cut for GTX 1660 Ti, NVIDIA has chosen to bring down the price of a more expensive graphics card. The RTX 2060, which features ray-tracing tech, originally launched last year for $349. That card will now be available for $299, just $20 more than AMD's RX 5600 XT.

We won't know how these two cards stack up until third-party reviews for the RX 5600 XT are released in the lead-up to its launch on Jan. 21. If the RX 5600 XT can come close to the RTX 2060 in terms of performance, AMD will likely have a winner on its hands. And even if the RTX 2060 offers better value, NVIDIA's margins could suffer thanks to the competition.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.


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