Why Didnt NVIDIA Corporation Reveal the GeForce GTX 1080 Ti at CES?

By Ashraf Eassa Markets Fool.com

Going into the 2017 Consumer Electronics Show, expectations were high that graphics specialist NVIDIA (NASDAQ: NVDA) would unveil its next generation GeForce GTX 1080 Ti graphics card targeted at enthusiast gamers.

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Image source: NVIDIA.

Indeed, graphics card rumor website VideoCardz, which has a generally good track record, was confident that it would be announced at the event.

However, during NVIDIA's CES keynote, CEO Jen-Hsun Huang didn't announce -- or even tease -- the 1080 Ti.

Not much is known about the 1080 Ti, other than that it'sbelieved to be a cut-down version of the chip that powers the NVIDIA Titan X, and that it will certainly deliver more performance than the company's current flagship GeForce GTX 1080 graphics card -- launched back in May 2016. It will probably be a tad slower than the Titan X graphics card, launched two months later.

Why didn't NVIDIA announce the 1080 Ti? Why is it reportedly waiting until March to launch it? Although only NVIDIA knows for sure, I'd like to offer up my speculation on the matter.

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Managing channel inventories

When NVIDIA launches the 1080 Ti, it's likely to occupy a higher price bracket than the current 1080 cards do. Although this fact may make it appear that the 1080 Ti will have minimal impact on the demand for 1080 graphics cards, the reality is that the 1080 Ti will almost certainly cannibalize sales of the 1080.

Indeed, individuals who may have gone for a 1080 in the absence of the 1080 Ti may find themselves willing to spend a bit more to get more performance.

Now, this isn't a bad thing for NVIDIA or its add-in-board partners. Substitution of a lower-priced 1080 for a higher-priced 1080 Ti is a win for everyone involved.

However, because the 1080 Ti stands to cannibalize sales of the 1080, it's important for NVIDIA to allow its channel partners to bring down their inventories of 1080-based add-in-boards to levels commensurate with expected future demand before introducing the 1080 Ti.

Why would NVIDIA need to bring down channel inventories?

About a month ago, Pacific Crest analyst Michael McConnell said (by way of Barron's) that during his team's "quarterly supply chain conversations in Asia," there was a "notable tone change at several first-tier desktop graphics card manufacturers surveyed regarding sell-through and inventory levels in the channel."

He noted that inventory levels of the GeForce GTX 1080 and GeForce GTX 1070, NVIDIA's highest-end desktop PC gaming graphics cards, rose to "2 to 2.5 months in the channel, versus targeted levels of 1 to 1.5 months due to weaker-than-expected sell-through in late October and November."

McConnell also said at the time -- and remember, this note was published in the first half of December -- that "desktop graphics card manufacturers began to experience order push-outs and cancellations of GTX 1080 and 1070 cards from channel customers ahead of the holiday season."

In other words, if McConnell is correct, high-end graphics card demand is slowing.

So if graphics card vendors' channel partners -- think distributors such as Newegg.com and Amazon.com, among many many other graphics card resellers -- are trying to bring down their own demand, they may not be all that keen to stock up on 1080 Ti cards now.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com and Nvidia. The Motley Fool has a disclosure policy.