AMD (NASDAQ:AMD) recently launched its RX 460, 470, and 480 graphics cards for the budget GPU market. The Polaris-based cards cost from $100 to $240, are optimized for virtual reality games, and are powered by 14nm FinNET GPUs, which are more power-efficient than Nvidia's (NASDAQ:NVDA) 16nm GPUs.

The RX 480, which is priced at $200 for the 4GB version and $240 for the 8GB version, reportedly offers comparable performance to Nvidia's older GTX 980, which costs about $100 more. While none of the Polaris cards are designed to challenge Nvidia's newest GTX 1070 and 1080 cards -- which start at $380 and $600, respectively -- they could appeal to more budget-minded gamers who want a cheaper way to experience high-end VR games. AMD's initial launch was met with glowing reviews, with ExtremeTech calling the RX 480 the "best $200 GPU you can buy today."

The RX 480. Image source: AMD.

Unfortunately, that positive buzz was immediately overshadowed by reports of power draw issues with the RX 480. The RX 480 was advertised as having a maximum power draw of 150W, but initial reports showed that some cards were drawing as much as 170W from some systems. Furthermore, the affected cards drew up to 90W from the PCIe slot, which far exceeded the 75W that the slot was intended to provide.

The AMD discussion boards quickly filled up with complaints of fried PCIe slots, and AMD stated that it was working on an updated driver to fix the issue. It's unclear whether or not a software update can get the cards to behave, but it raises some serious questions about AMD's GPU business.

Looking back at AMD's power consumption issues

AMD has lost a lot of ground to Nvidia in gaming GPUs over the past few years. Research firm JPR reports that AMD controlled just 23% of the add-in graphics board market in the first quarter of 2016, compared to Nvidia's 77% share.

While Nvidia has dedicated most of its R&D and marketing to its GPU business, AMD has been trying to battle Intel (NASDAQ:INTC) in x86 processors and Nvidia in GPUs at the same time. AMD has been losing both those battles and must split its R&D expenses (which were already 32% lower than Nvidia's in their most recent quarters) across its CPU, GPU, and embedded chip businesses.

As a result, AMD has constantly struggled to match Intel and Nvidia in developing more power-efficient hardware. To keep up with Nvidia, AMD took the cheaper route of boosting clock speeds without upgrading its architecture as frequently. This meant that AMD's cards often offered performance comparable to Nvidia's cards at lower prices, but the cards also drew more power and ran hotter -- which wasn't great for high-powered gaming rigs.

Polaris was intended to fix that problem

AMD knew that it needed to make its cards more power-efficient to appeal to PC gamers, a market that has bucked the the overall slowdown in the PC market. The 14nm Polaris cards were supposed to enable AMD to sell cards that were both cheaper and more power-efficient than Nvidia's high-end cards from last year.

AMD says that it will release the new RX 480 driver on July 7, along with a software update that will add optional "compatibility" profiles to reduce the card's overall power consumption. In addition to lowering the PCIe power draw below 75W, AMD promises that the new driver will boost overall performance by up to 3%.

If the software update fixes the problems with the RX 480, AMD customers and investors should breathe a sigh of relief, since the issue likely isn't hardware related. But if additional power draw issues appear after the update, the problems could be more deeply rooted and might impact sales of the new card.

Why AMD investors should care

AMD stock has nearly doubled over the past 12 months on high hopes that its Polaris GPUs, next-gen Vega GPUs, Zen CPUs, and new SoCs for upgraded PS4s and Xbox Ones will turn its business around. The RX 480 plays a key role in this turnaround, since it's the top card in its budget VR push, so investors should follow this story closely to see if the power draw issues are resolved in a timely manner.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.