AMD Is Already Slashing Prices on Polaris

Image source: Advanced Micro Devices.

In an effort to win back lost market share, Advanced Micro Devices (NASDAQ: AMD) aimed its Polaris graphics architecture at the mainstream portion of the market. The RX 480, priced at $199 or $239 depending on the memory configuration, launched at the end of June. The RX 470, priced at $179, launched in early August, as did two variants of the RX 460, priced at $109 and $139. NVIDIA (NASDAQ: NVDA) went in the opposite direction with its Pascal GPUs, targeting the high-end first.

This strategy made a lot of sense for AMD, which had seen its unit share of the graphics card market bottom out below 20% last year. The company made some progress on the market share front prior to Polaris' launch, but these new graphics cards will ultimately determine whether AMD will be able to claw its way back to a strong No. 2 position in the industry.

AMD's plan hit a bit of a snag in October. NVIDIA launched the GTX 1050 and GTX 1050 Ti on Oct. 25, priced at $109 and $139, respectively. This marked Pascal's maiden voyage into the low-end of the market, providing competition to AMD's cheaper Polaris graphics cards.

In response to the launch, AMD slashed the official prices on the RX 460 and RX 470. The RX 460 now starts at $100, while the RX 470 goes for $170. It will take time for actual prices at retailers to reflect these changes, but it's clear from these price cuts that NVIDIA was more aggressive than AMD was expecting.

Trouble for Polaris

According to Tom's Hardware, the GTX 1050 soundly beats the RX 460 in nearly every benchmark, often by a significant margin. To AMD's credit, the performance gap is much smaller in games using either DirectX 12 or Vulkan. But in older games, NVIDIA's card dominates. Given that the GTX 1050 launched at the same price as the RX 460, it makes sense that AMD was quick to lower the price. At the same price, NVIDIA's offering is the clear winner.

The GTX 1050 Ti isn't nearly as disruptive, filling the gap between the GTX 1050 and AMD's RX 470. But the RX 470 has issues of its own. PC World, in its review, called the RX 470 "a great graphics card with a terrible price." At a launch price of $179, the gap between the RX 470 and the higher-end RX 480 simply wasn't big enough. The $10 price cut makes the RX 470 a bit more compelling, so we'll have to wait and see if the new price point drives demand.

The big picture

AMD's reign as the undisputed leader in the mainstream portion of the graphics card market only lasted a few months. NVIDIA's new Pascal cards, particularly the GTX 1050, are sure to make AMD's goal of winning back market share significantly more difficult. This isn't the first time that NVIDIA has forced AMD's hand on prices. Back in late 2014, NVIDIA's launch of the GTX 970 and GTX 980 prompted major price cuts on AMD's flagship graphics cards. That launch marked the beginning of NVIDIA's robust market share gains over the next year.

Beyond the mainstream market, AMD won't be launching higher-end Vega graphics cards until the first half of next year. NVIDIA's high-end Pascal graphics cards face no real competition at the moment, and it could be another six months before AMD finally provides an alternative.

Reactive price cuts, particularly so soon after launch, are never a good sign. NVIDIA is going after the $109 price point aggressively, perhaps more aggressively than AMD was expecting. The takeaway: AMD executing its mainstream strategy and winning back considerable market share from NVIDIA will be easier said than done.

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Timothy Green 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.