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NVIDIA (NVDA) Launches Ada Lovelace-Powered Gaming Chips

Zacks Equity Research
·4-min read

NVIDIA Corporation NVDA introduces next-generation gaming chips, powered by its latest AI-enabled Ada Lovelace architecture, to provide gamers with a whole new experience with more realistic images.

During a keynote at the NVIDIA GTC conference on Tuesday, the company’s CEO, Jensen Huang, stated that the new Ada Lovelace architecture would be used in an upcoming new GeForce RTX 40 series graphics card — RTX 4090. Huang revealed that RTX 4090 graphics cards would go on sale from Oct 12 onward at $1,599.

Additionally, the company stated that the existing two versions of RTX 4080 graphics cards would also use the new Ada Lovelace architecture. The two new versions of RTX 4080 cards will go on sale in November and will cost $899 and $1,199, respectively.

NVIDIA Corporation Price and Consensus

NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote

Ada Lovelace Provides Technological Edge to NVIDIA

We believe that the company’s new Ada Lovelace architecture will provide NVIDIA with a technological edge against its rivals in the graphics card space. Named after a 19th-century mathematician, who many consider the first computer programmer, Ada Lovelace architecture-based chips use AI to improve video game graphics.

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The new architecture-based graphic processing units (GPUs) are built by Taiwan Semiconductor Manufacturing Company TSM with its so-called “4N” chip manufacturing technology. NVIDIA revealed that the GPUs come with Micron Technology’s MU new GDDR6X memory and claim to have improvements across its shader cores, RT cores and Tensor cores.

Per the company, Ada Lovelace-powered graphics cards have the capability of improving existing games immediately, and the enhanced AI feature will learn from the gameplay. NVIDIA claims that its upcoming RTX 4090 and RTX 4080 chips will be two-to-four times faster than the predecessors RTX 3090 TI and RTX 3080 TI, respectively.

Built on Taiwan Semiconductor’s 4N chip manufacturing technology with Micron’s memory, NVIDIA RTX 4090 is believed to be the most advanced graphic chip in the industry. Accompanied by Micron’s 24 GB (gigabyte), the graphics card will have 76 billion transistors. This will give NVDA a technological edge over arch-rivals, including Advanced Micro Devices AMD.

With its sustained focus on developing new and more advanced products, NVIDIA has always maintained a significant technological gap against its rivals in the graphic card space. However, Advanced Micro Devices’ latest announcement of launching the new GPU chip architecture — RNDA 3 — is believed to be more competitive with NVIDIA’s chips.

AMD is scheduled to launch the RNDA 3 graphic chip technology on Nov 3 this year and is likely to close some technological gaps with NVIDIA.

New Chips to Drive Graphic Segment Revenues

The launch of new more advanced chips will further drive NVIDIA’s Graphic segment revenues. Although the company’s sales from chips used for computing and networking are growing rapidly, graphic chips still make up the major contributor to total revenues.

In fiscal 2022, the Graphics business unit’s sales soared 61% year over year and contributed 59% to total revenues.

Furthermore, the new launches, with hefty pricing, are likely to boost NVIDIA’s Gaming market-end division’s revenues, which are being hurt by weak consumer spending amid the rising inflation and probable global economic slowdown concerns.

NVIDIA impressed investors with its stellar financial performance and experienced robust top and bottom-line growth in the past several quarters.

However, the weakening demand for NVDA’s chips used in the gaming end market put a brake on its growth momentum in the second quarter of fiscal 2023. Its Gaming segment revenues plunged 33% in the quarter due to a reduction in channel partner sales due to macroeconomic headwinds.

Therefore, we believe that this is the right time to release new graphics cards with enhanced AI capabilities to create demand for its chips used in the Gaming end market. Furthermore, reportedly, sales of the new Ada Lovelace chips will not be affected due to the U.S. ban on NVIDIA, which restricts the company from selling its top AI data center chips to China.

Currently, NVIDIA and Micron each carry a Zacks Rank #5 (Strong Sell).

Meanwhile, Taiwan Semiconductor has a Zacks Rank #4 (Sell). Advanced Micro Devices carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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