For much of the pandemic, Nvidia (NVDA 1.14%) was selling every GPU it could have made. The cryptocurrency bubble coupled with booming video game sales sent demand for graphics cards, as well as prices, through the roof.

The party is officially over. The graphics card market is now in oversupply as Nvidia and its partners resort to discounts to bring down inventory levels. Graphics cards are no longer hard to come by, and prices have cratered. Nvidia's gaming revenue crashed 33% year over year and 44% sequentially in the second quarter.

It's a tough demand environment right now. PC gamers itching for an upgrade may be in "wait and see" mode, not wanting to buy a new graphics card as prices continue to drop. And with the cryptocurrency market largely imploding this year, demand from crypto miners has essentially vanished.

Nvidia is pushing ahead regardless. The company unveiled two next-generation RTX 40 graphics cards on Tuesday targeting spendy PC gamers and creators.

Massive performance gains

Nvidia's strategy this time around is to focus exclusively on the ultra-high end of the market at first. The GeForce RTX 4090 is a monster, with over 16,000 graphics cores and 24GB of GDDR6X memory. The GeForce RTX 4080 will be a bit less expensive, sacrificing some cores and memory for a lower price point.

The RTX 4090 will go for the princely sum of $1,599 when it launches on Oct. 12. The RTX 4080 will come in two configurations, with a 12GB version priced at $899 and a 16GB version priced at $1,199. Both versions are expected sometime in November.

These RTX 40 graphics cards are based on Nvidia's new "Ada Lovelace" architecture, and they're built on TSMC's 4N manufacturing process. The combination of architectural improvements, a new process node, and Nvidia's AI-powered software delivers major improvements in both power efficiency and performance.

Nvidia claims that its new cards are twice as power efficient under the best-case scenario compared to its last-gen products. Gaming performance takes an even bigger leap, partly due to software improvements that use AI to create new frames on the fly. The RTX 4090 is four times as performant as its predecessor in Cyberpunk 2077, according to Nvidia, and it delivers twice the performance in other games Nvidia tested.

These numbers come directly from Nvidia, so take them with a grain of salt. But it's safe to say that the RTX 40 series represents a huge leap from the RTX 30 series.

Demand is a big unknown

For gamers and creators with deep pockets, the RTX 40 series will be tough to resist. Even those using last-gen RTX 30 graphics cards would greatly improve power efficiency and performance with an upgrade.

But the graphics card market today is not the same as it's been over the past two years. A substantial number of high-end graphics cards were going to cryptocurrency miners, and that's not happening anymore. What's more, Nvidia will be competing with a flood of its last-gen graphics cards, and last-gen graphics cards from rival AMD, that are becoming more affordable with each passing day. That supply will eventually dry up, but it will take time.

How many potential non-crypto mining customers willing to drop nearly $1,600 on a graphics card are there? There's likely a lot of pent-up demand from PC gamers who've avoided upgrading during the pandemic years due to high prices, but many will probably wait for lower-end cards to come to market, or simply buy a cheaper last-gen option.

The RTX 40 series from Nvidia looks like it could be a home run, but lofty pricing, a weak demand backdrop, elevated inflation, and recession fears could pose major problems. We'll know within the next few months whether these new cards are enough to resuscitate Nvidia's gaming business.