Shares of Nvidia (NVDA 3.51%) are down 43% since the start of 2022. The company has struggled to offload its backlog of 3000 series graphics cards, and reaction to its new 4000 series has been tepid at best.

The response to its newly released RTX 4090 and RTX 4080 graphics cards is a potential disaster for the company, as 59% of Nvidia's revenue comes from its Graphics segment. The release of the 4000 series graphics cards (GPU) is its biggest GPU launch since 2020. Yet, in the few weeks since the series was announced, Nvidia has already "unlaunched" one model and is cutting the price on others.

However, all is not lost. Here's why Nvidia can still crush AMD again in 2023.

Nvidia remains the undisputed leader

Despite its rocky 4000 series launch, Nvidia is still the undisputed leader of the consumer graphics cards market. In the third quarter of 2022, Nvidia increased its share of the discrete graphics card market to 88%. That's up from 80% in the previous quarter, according to Jon Peddie Research. Meanwhile, AMD (AMD -2.38%) saw its market share fall from 15% to 8%. Intel, which only entered the discrete graphics card market this year, already has a 4% market share.

Unfortunately, Nvidia's position in the market has led it to miscalculate its RTX 4000 series GPU line-up. Originally, Nvidia announced three graphics cards to lead the new series: The highest-end RTX 4090, the RTX 4080 16GB, and the RTX 4080 12GB. Traditionally, when buying an Nvidia graphics card, the higher the number, the better. Aside from that, any graphics cards that have the same model number, like "4080," are expected to perform more or less the same. 

Therefore, when announced, the RTX 4080 16GB and 12GB were expected to perform the same, with the caveat that the extra 4GB VRAM in the higher model would "future-proof" it. That quickly turned out not to be the case. In fact, the difference between the 16GB and 12GB variants was so big that gamers began dubbing the lower model an RTX 4060 in all but name. The backlash was so significant that Nvidia officially "unlaunched" the RTX 4080 12GB.

Moreover, gamers have been reluctant to upgrade due to the high prices of the RTX 4090 ($1,599) and RTX 4080 16GB ($1,199). As a result, just weeks after the RTX 4090 and RTX 4080 16GB were released, there have already been official price drops in some regions.

Enter AMD

AMD had the benefit of announcing its new graphics cards after Nvidia had already shown its hand. As such, AMD came out swinging with its RX 7900 XTX and RX 7900 XT graphics cards priced $200 to $300 cheaper than Nvidia's RTX 4080 16GB. 

AMD's new graphics cards will be released on Dec. 13. The RX 7900 XTX is designed to go toe to toe with Nvidia's RTX 4080 16GB at $999 versus $1,199. As a result, AMD's announcement put a dampener on Nvidia's launch plans as gamers wait to see how its graphics card compares to Nvidia's offering in real-world tests. 

However, Nvidia's advantage is its pricing flexibility. It's rumored that Nvidia's RTX 4080 16GB costs as little as $300 to manufacture. Meanwhile, AMD's RTX 7900 XTX manufacturing cost is supposedly as high as $500. 

That means Nvidia is in the enviable position of being able to watch what AMD does and react accordingly. Currently, Nvidia is the only company selling new-generation graphics cards, and it's doing so at huge profit margins. 

Additionally, there are rumblings that Nvidia is considering a price cut for its RTX 4080 model right around the time AMD's graphics cards will release. If manufacturing costs are accurate, then Nvidia has a lot of leeway to match the pricing of any graphics cards AMD releases. 

AMD may have won the PR battle since the announcement of its new graphics cards, but Nvidia is set to win the profit and market share war. Unfortunately for AMD, its graphics cards probably won't be gaining much traction against Nvidia's current and future line-up.

However, that doesn't mean Nvidia is a solid investment right now. The graphics card market has declined massively in recent quarters. Nvidia's gaming division revenue was down 51% in the third quarter.

Nvidia may retain its market share with better offerings than AMD, but it's too soon to tell whether the 4000 series will be a hit with consumers.