On Jan. 22, NVIDIA (NASDAQ:NVDA) released the GTX 960 graphics processor. According to The Tech Report, the GTX 960 is aimed at the $199 price point. More importantly, though, it looks as though NVIDIA has delivered a chip that not only seems to be extremely competitive on a performance-per-watt basis with products from Advanced Micro Devices (NASDAQ:AMD), but has an excellent relative cost structure to boot.
In other words, it looks like a winner. Let's take a closer look.
Small die size, low power consumption, good performance
According to The Tech Report, the GTX 960 GPU (also known as the GM206) is built on the tried-and-true 28-nanometer manufacturing process. The die size weighs in at 227 square millimeters in that process. In contrast, its direct competitor per the review, the Radeon R9 285, weighs in at a die size of 359 square millimeters. The NVIDIA chip is very likely cheaper to manufacture.
Furthermore, according to The Tech Report, the GTX 960 and R9 285 are "very evenly matched." The review site claims that the R9 285 has a "slight advantage in the overall [Frames-Per-Second] average" but that it "falls behind the GeForce GTX 960 in [The Tech Report's] time-sensitive 99th percentile metric."
According to the review, the aforementioned "99th percentile metric" is "a better indicator of overall performance."
Finally, the review showed that the NVIDIA chip is far more power efficient than the AMD chip, drawing 78W less power at full power consumption. This led the reviewer to state that, even following AMD's price cuts on the R9 285, "in virtually every case, you'll pay more for the Radeon than for the competing GeForce in other ways -- whether it be on your electric bill, in terms of [Power Supply Unit] requirements, or in the amount of heat and noise produced by your PC."
The competitive implications
I believe that the GTX 960 gives NVIDIA a very price/performance competitive part at the relatively high volume $199 GPU price point. Not only does the NVIDIA card offer performance similar to that of its competition, but it offers better power consumption, and looks to be meaningfully cheaper to manufacture.
This means that if AMD chooses to keep its R9 285 at roughly the same levels as the NVIDIA card, I wouldn't be surprised if it lost further market share. If AMD drops the price on what appears to be a relatively big chip, this could have a pretty negative effect on the company's gross profit margin profile -- and NVIDIA could drop prices as well with better margins. Any way you slice it, AMD looks as though it is going to face some serious competitive pressures in this segment of the gaming graphics chip market.
NVIDIA is on a roll
NVIDIA's execution with its Maxwell family of products has been very impressive. The GTX 970 and GTX 980, launched last year, were impressive products, and it seems that this trend will continue as the company proliferates Maxwell down its product stack. The company's bases are well covered, and I think that its position in the gaming graphics processor market should continue to strengthen -- a very welcome development for NVIDIA investors.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple and Nvidia. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.