NVIDIA's New Budget Graphics Cards Are Bad News for AMD

Image source: NVIDIA.

NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) have been engaged in a bitter graphics card battle for years, but NVIDIA just landed a new blow to its rival.

The company debuted two new graphics cards recently -- the GeForce GTX 1050 and 1050 Ti -- based on the company's new Pascal architecture, and they sell for just $109 and $139, respectively.

NVIDIA isn't a stranger to the budget graphics card market, and these two particular cards have been rumored for a few months. But the new cards should worry AMD for two key reasons: The cards offer some of the best performance at the lowest prices, and NVIDIA is marketing them to new gamers, a group it typically doesn't focus on.

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Good for NVIDIA

NVIDIA made it clear in a blog post that the 1050 and 1050 Ti are great for new gamers, saying, "If you're a new gamer, these two new GPUs let you be a part of the biggest story in gaming." NVIDIA usually tops the list for the best high-end graphics cards, but by targeting new gamers, it's also ensuring that it dominates the low-end market as well.

The company already holds an impressive 70% of the discrete desktop GPU market, but AMD has started to make some gains over the past year.

Data source: Jon Peddie Research.

By releasing the two new graphics cards, NVIDIA updates its budget graphics cards and hopefully spurs new sales in the lower-end market. That's important for NVIDIA because the company's own average selling price (ASP) trend has tilted toward pushing ASPs higher, not lower. That's typically a good thing, but in this case, lower prices mean it can grab more of the budget card market.

Bad for AMD

While AMD is making some market share gains on NVIDIA, it's clearly still the underdog.AMD has been able to hold onto customers primarily by offering lower-priced cards than NVIDIA, but this latest move from its rival could end up hurting AMD.

AnandTechrecently wrote that the pricing differences between NVIDIA's new graphics cards and AMD's low-end cards "[mean] that AMD's two-month run as the sole supplier of current-generation entry-level video cards is about to come to an end."

NVIDIA's new cards compete directly with AMD's RX 460, which starts at $109 for the 2GB version (the same as NVIDIA's 1050) and $140 for the 4GB version(the same as NVIDIA's 1050 Ti).

But aseparate AnandTech article noted that while the prices are about the same, "In theory, Nvidia's cards should be a wee bit faster, with the 1050 Ti in particular sporting some great specs for the money."

This is just the beginning

We'll still have to wait and see how well the new GTX 1050 and 1050 Ti sell compared to AMD's comparable cards before we know how much of an advantage this could be for NVIDIA. The 1050 Ti will begin selling October 25, and the 1050 will follow on November 8, with NVIDIA saying the cards will be available worldwide on those dates.

What will be interesting to see is if NVIDIA continues to focus on the lower-end market even as it dominates high-end cards. NVIDIA earned about 55% of its total revenue in Q2 2017 from its gaming segment, and grabbing both ends of the graphics card spectrum could help the company keep its gaming revenue up. AMD may have made some recent market share gains against NVIDIA, but these new cards prove that NVIDIA isn't willing to let its rival gain any more ground without a fight.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.