After watching the notable launch of the Nvidia (NVDA) second-gen RTX GPU, I waited for an article on Seeking Alpha reflecting the importance of this event for Nvidia and its stock. Instead, the most recent article takes a pro-AMD (AMD) narrative. While I am a fan of AMD, I nonetheless see this launch as highly bullish for Nvidia and would like to present to readers a counterpoint – that this is primarily good news for NVDA investors.
This article is primarily about NVDA, but let me not dismiss AMD whilst writing. AMD is a legitimate competitor to Nvidia and should not be dismissed. Most Nvidia competitors are in the business of copying Nvidia’s technological progress, selling later and cheaper. AMD, in contrast, is quite similar to Nvidia in its R&D department in that it attempts novel designs, taking risks in the marketplace. AMD is not a laggard nor a copier and is a strong company on its own – well worth an investment.
Positioned for Riding the Wave
That out of the way, let us discuss Nvidia (somewhat) in a vacuum. This is a company that has not only been on the forefront of GPU tech for decades but is one of the few tech companies positioned for the significant transition in the entertainment industry, away from passive entertainment (e.g., film) and into the growing field of video games. This is an industry set to grow by 25% in the next three years.
In the Nvidia’s GeForce RTX 30 Series launch video, CEO Jensen Huang himself admits that the company is riding this market wave: “It is the gamers and their insatiable demand that is the driving force of the GPU.” The company is clearly aware of the end-users’ issues with modern gaming and is positioning its products to solve these problems to where competitors have no solutions. One issue tackled is discussed in minute five of the video (see below).
NVIDIA GeForce RTX 30 Series | Official Launch Event [4K]
Latency. This is a huge issue for online gaming, especially in esports, a field of gaming engaged in by 75% of Nvidia’s gaming base, according to Huang. Pushing latency asymptotically down to zero will not only solve a huge issue in competitive esports but also make overall gaming smoother for any online players.
The Latency Issue Nearly Solved
This is what Nvidia claims to be offering with its newest GPU. But a reduction in latency via GPU alone is impossible. A common misconception is that a better GPU only produces a smoother gaming experience. This is not true, as lag can be generated anywhere between your mouse movement to your monitor display. If Nvidia were focused merely on creating the highest quality GPU, they could do so, blaming mouse and monitor (and every component in between) for sub-par gaming experiences.
This is why it is encouraging to hear that Nvidia is working with the manufacturers of other computer components in this endeavor. Clearly, they have the end-user in mind. This could very easily lead to a situation in which gaming mouse companies, monitor companies, and even CPU companies start recommending Nvidia GPUs for the best experience; Nvidia, by improving the overall experience through all components, gains free marketing from all the other big boys in PC gaming.
Nvidia is claiming its new GPU can bring latency down to nearly 10ms. This is a huge improvement over most systems. If you cannot fathom the difference between 100ms (most modern systems have 30-100ms latencies, according to Huang) to 10ms, check out the 1min mark in the video below – and now apply that idea to gaming (ignored the publication date; the point is a visceral presentation of latencies).
Applied Sciences Group: High Performance Touch
Nvidia Reflex: A Must-have
The new Nvidia Reflex mode helps all systems reduce latency. Reflex is the first of its kind and can easily become an essential part of any online gamer’s system. Essentially, Reflex enhances the communication between the GPU and CPU so as to reduce latency up to 50%.
But more interesting to me (as a gamer), is Reflex’s tweaking capabilities. With Reflex, you can see the latency of every component of your system. Before Reflex, gamers could not easily know the latency of each component (e.g., mouse). Now, with Reflex, latency can be both known and tweaked via automatically overclocking the GPU.
More on Reflex below.
What is NVIDIA Reflex
The RTX 30 Series outperforms the 2080 Ti, which is currently the best GPU on the market, and is set to sell at a lower price. I’ll probably be giving Nvidia more of my money, even though I just got a 2080 Ti under six months ago. Upgrading is just that much worth it.
Conclusion: Nvidia Is a Different Breed
To say that the new GPU release from Nvidia is impressive is an understatement. It just raised the bar for all GPU competitors and essentially just made its own market leaders obsolete. Perhaps this is not a smart business move from a traditional business perspective, but from another perspective, the release of the RTX 30 series (faster, more power-efficient, and cheaper than the market leader, which is also an Nvidia product) shows that this company is primarily focused on a passion for GPU technology and moving the market forward, more so than simply selling product.
I believe RTX 30 marks a large change in the gaming market. Nvidia was already ahead of AMD before the RTX 30 announcement in terms of pure GPU power, and so the change does not lie in the AMD/Nvidia paradigm. Instead, the change is one in the PC-vs-console war, with the RTX 30 blowing away the GPUs of the upcoming Sony (SNE) and Microsoft (MSFT) consoles; I do not believe the release dates of the RTX 30 GPUs, set only months before the release dates of the PlayStation 5 and Xbox Series X, are mere coincidences.
I say go long NVDA, but cautiously. As I’ve stated in previous articles, tech is overvalued to the tune of the dot-com bubble. NVDA might fall before it rises, but I would not worry too much about price at this point – NVDA will be more expensive in the near/mid term than it is now.
If NVDA dips to a decent extent, you’ve got a good buy-in point. Before earnings reports that include the RTX 30, you’ve got a good buy-in point. Before PC/console sales figures post-PS5/Xbox release, you’ve got a good buy-in point.
This is the fundamental news that fuels the earnings news that fuels the stock price. You can get in now, while the market is overbought and still come out profitable. Or you can risk waiting for a pullback and come out even more ahead. Play as your risk tolerance allows.
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Disclosure: I am/we are short MSFT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.