Advanced Micro Devices (AMD 0.79%) is filling in a big gap in its current-gen graphics card lineup. The RX 7000 family previously had just three entries: the RX 7600 priced at $269 and a pair of RX 7900 cards that start above $700. Up until now, price points in between were served with AMD's last-gen RX 6000 graphics cards, which are still widely available and selling well below their original manufacturer's suggested retail price (MSRP).
AMD announced two new graphics cards on Friday, both of which are aimed squarely at gaming at 1440p resolutions. The RX 7700 XT will sport a $449 price tag when it launches on Sept. 6, while the RX 7800 XT will go for $499. The latter will feature one-third more memory, an 11% advantage in compute units, and a wider memory interface than the former.
NASDAQ: AMD
Key Data Points
A tough market and too-high pricing
One reason for the sluggishness of AMD's RX 7000 rollout is likely the state of the graphics card market. Shipments of graphics cards plunged 38.2% year over year in the first quarter, according to Jon Peddie Research, and AMD's unit-market share was cut in half. Demand has fallen off a cliff since the COVID-19 pandemic, and pricing has largely normalized.
The latest graphics card launches from NVIDIA and AMD have been lackluster, particularly in the high-volume midrange portion of the market, which has not helped the situation. NVIDIA's trio of RTX 4060 and RTX 4060 Ti graphics cards target the $299 to $499 price range, but they're all somewhat hobbled by a narrow memory interface. The priciest of the bunch, the $499 16GB variant of the RTX 4060 Ti, barely makes sense as a product. Tom's Hardware summed it up this way: "The further along we get with the RTX 40-series, the more it feels like a generation that most people can skip if their current GPU isn't too old."
AMD's only midrange current-gen graphics card available now is the RX 7600, which barely outperforms the last-gen RX 6650 XT at a higher price. AMD even slashed the price at the last minute, a necessary move given NVIDIA's pricing on its $299 RTX 4060.
AMD is positioning the RX 7800 XT as a competitor to NVIDIA's RTX 4070, which sells for around $100 more, although the company will also be competing with its own discounted last-gen graphics cards. Depending on the performance of these new cards, that could be a significant problem. The era of new graphics cards providing huge gains in performance per dollar appears to be over.
The RX 7800 XT will be up against the last-gen RX 6800 XT, which currently sells for around the same price. Tom's Hardware expects a minimal performance gain for the new card, maybe 6% to 8%. That's nowhere near enough to compel anyone with a last-gen card to upgrade, and the prices on last-gen cards may move further downward following this launch.
Given AMD's market share losses, being more aggressive on pricing in an attempt to steal market share from NVIDIA would have made sense. Instead, the company has likely priced its new products too high.
No benefit in the third quarter
While these new graphics cards will be launched with nearly a month left in AMD's third quarter, the company doesn't expect any improvement in its gaming business. AMD expects a year-over-year and sequential decline for its gaming segment in Q3.
The gaming segment includes semi-custom chips that power the major game consoles in addition to GPUs. Normally, Q3 is seasonally strong for the game console chip business since holiday inventory is being built up. This suggests that the graphics portion of the segment is going to perform much worse than the segment as a whole.
We'll have to wait for third-party benchmarks to know for sure how AMD's new graphics cards perform, but it's looking like a repeat of the RX 7600 launch is likely: middling performance gains coupled with pricing that's just too high. NVIDIA's graphics cards come with more advanced features and better ray-tracing performance, so AMD really needs to be substantially undercutting the market leader on price and soundly beating its last-gen cards on performance per dollar to win over gamers. Without doing those things, it will be tough to win significant market share.
