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Why Nvidia Stock Dropped This Morning

By Rich Smith – Sep 13, 2021 at 12:16PM

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Is Intel preparing to undercut Nvidia on graphics chip prices?

What happened

Shares of semiconductor manufacturer Nvidia (NVDA -1.16%) -- a supplier of chips for everything from playing video games to mining cryptocurrency, to performing artificial intelligence tasks -- slipped 2% as of 11:05 a.m. EDT Monday in response to rumors that rival chipmaker Intel (INTC 0.61%) could be mounting a challenge to Nvidia's dominance in graphic cards.

So what

As TechRadar reported this morning, a "leaked slide" from a presentation apparently authored by Intel describes the latter's plans to release "a new Intel Arc Alchemist GPU ... lining up in performance terms with [Nvidia's] RTX 3070" graphics processor -- and potentially at a lower price.

Nvidia describes its GeForce RTX 3070 family as "the ultimate play" in graphics processors, suitable for "the most demanding games" -- and priced starting at $499. According to the slides that TechRadar has reviewed, however, the new Intel chip -- if it's for real -- would compete with the Nvidia chip on performance, but cost only "in the $300 to $499 range for the top-end model."  

Glowing semiconductor chip

Image source: Getty Images.

Now what

Although that would be good news for a world starved for high-end semiconductor chips in the face of a worldwide shortage, Nvidia wouldn't necessarily enjoy the competition, which could force it to compete on price at a time when it should be enjoying windfall profits. That being said, TechRadar's article on the rumored Intel offering is chock-full of caveats that the presentation slide it saw might be "really old," not "genuine," or even "fake."

Ultimately, TechRadar concludes, "we shouldn't be too quick to dismiss" the possibility that Intel is planning to release a graphics chip to challenge Nvidia's dominance, and undercut Nvidia's prices. But even if that's true, the author notes that the rumored Intel chip probably wouldn't arrive before "the start of 2022" in any case.

That gives Nvidia a bit of breathing room to prepare its response -- just in case the rumor is true.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nvidia Stock Quote
$156.39 (-1.16%) $-1.84
Intel Stock Quote
$28.90 (0.61%) $0.17

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