Why are GPU Prices Dropping Worldwide?

A graphic card is one of the most significant components of any PC. Consequently, it is also costly. When buying PCs, usually the budget revolves around the price of GPU. Since the Covid-19 pandemic began, the prices of GPUs raised terrifically. It didn’t matter whether you bought AMD or NVIDIA. But recently, graphic card prices have sunk like never before. 

A news report from Bloomberg claims that prices of used GPUs have dropped as much as 50%. The retail prices also saw a modest decline (around 3% at some retailers). While the retail prices have dropped little, we can observe a declining trend. 

Some people say it is a welcome change from recent years. Gamers, who patiently waited for prices to drop, are undoubtedly thrilled to see this change. But the question arises, why this sudden drop in prices?

GPU shortage in 2021

The recent price drop shows it is necessary to go back in time and understand the GPU market in 2021. Do you want to build a new gaming PC in 2021? Good luck finding all components. There was an enormous shortage in the GPU market. There were a few reasons for the shortfalls and high prices. 

➜ Scalpers stockpiling on GPUs

As new GPUs came into the market, scalpers stockpiled GPUs and sold them at inflated prices. The situation was perfect for scalpers to earn quick cash from desperate customers.

Adding salt to the wound, scalping is considered a legal practice in many countries, including the US. There were no laws to prevent this practice. A few states in the US introduced some regulations to discourage scalpers, but it was too late.

➜ Covid-19 Pandemic

When covid pandemic broke globally, it disrupted supply chains worldwide. Many offices and companies shifted their employees to work from home. People staying at home meant the demand for electronics such as computers, laptops, mobile phones, etc. GPU manufacturers could not handle this increased demand. It created a shortage of GPUs as manufacturers could not meet customer needs.

➜ Semiconductors Chip Shortage

We were facing a global semiconductors chip shortage which affected everything. From computers to cars and airplanes, they all contain semiconductor chips. Every manufacturer had to limit production due to the unavailability of such essential components.

As a result, GPU manufacturing slowed to a level that could not meet increased supply demands.

➜ Cryptocurrency

Cryptocurrency got acceptance in recent years. Cryptocurrency depends on its miners to validate transactions. As its demand increased, more people got into the mining scene. However, to mine a cryptocurrency, you need an abundance of computing power provided by GPUs. As a result, more people started to buy GPUs for mining purposes.

Large-scale cryptocurrency mining operations began in various countries where people started using thousands of GPUs for mining simultaneously. NVIDIA reported an increase in revenues despite recording 1% fewer GPU purchases for gaming purposes. 

The Present Situation

NVIDIA RTX 3080 faced serious supply issues and remained out of stock on its launch in September 2020. However, NVIDIA recently saw a 50% drop in price since April 2022 in the secondhand market. Graphic cards are finally in stock at retailers. Scalpers have disappeared from the GPU market. Prices have also returned to normal at retailers. The RTX 3080 was almost 149% over the list price in January 2022, but by March, it was just 105% over the list price. As we have reached the later stage of 2022, some RTX 3080 cards are for sale on eBay for the below list price. 

Let us dive into a few points that can explain this change in the situation for GPUs.

➜ The Decline in Cryptocurrency Mining

The cryptocurrency market faced a remarkable decline in its prices. The second largest cryptocurrency, Ethereum, declined around 59% in 2022. As a result, the demand for crypto mining also decreased dramatically. 

Now you might wonder how this affects the GPU market. Well, in the first half of 2021, a quarter of all GPUs were purchased by cryptocurrency miners. Miners on GPUs to mine Ethereum spent an estimated budget of $15 billion. As a result, miners dominated the GPU market. 

NVIDIA reported a 50% increase in revenues despite reporting 1% fewer gaming-related purchases. However, the rapid drops in GPU prices coincide with $800 billion worth of cryptocurrency assets disappearing as Bitcoin and Ethereum take heavy blows to their values. 

You will not see the whole cryptocurrency industry competing for graphic cards. As the prices of crypto drop, mining becomes significantly less profitable, and the cost of GPUs and maintaining a mining farm may not be worth the money and effort in such circumstances. Resultantly, you can expect a remarkable decline in demand for mining GPUs. Thus, more supply is available for a regular user.

Previously stock GPUs were found listed below their retail price. However, if the demand for crypto mining increases again, you can expect a repeated increase in GPU prices.

➜ Release of new generation GPUs

NVIDIA is preparing to release its RTX 4000 series as RTX 4080 will be available to buy from 12th October 2022. Elsewhere, AMD will launch Radeon RX 7000 series on 3rd November 2022. 

As newer generations of GPUs flood the market, people will want to sell their older GPUs to buy newer ones. Retailers with older GPUs in stock would crave to sell older versions as soon as possible. Resultantly, you can find them listed on sale at retailers as they will want to clear their inventory for newer GPUs. 

Another aspect to consider is that when GPUs are in stock at retail shops, the demand for used GPUs declines. As demand lowers, prices decrease. In contrast to last year, when GPUs were out of stock, the cost of used GPUs was sky-high.

➜ NVIDIA’s Massive Stockpile of 5nm Wafers

The release of RTX 3080 was a complete disaster for NVIDIA in 2020. The newly released GPU went out of stock 15 minutes after being released. To avoid such a situation in the future, NVIDIA made a $7 billion deal with TSMC (Taiwan Semiconductor Manufacturer Company). 

They went on an expensive deal to provide stable launching for its RTX 4000 series. However, the crypto market crashed in 2022, which resulted in a flood of used RTX 3000 series. Consequently, the demand for the current generation of NVIDIA GPUs dropped. 

Reportedly, NVIDIA wants to renegotiate its deal with TSMC, but they are unwilling to compromise. Therefore, we have observed the lowest retail prices of the current generation of GPUs. 

NVIDIA is trying to ship its stock by lowering its prices. However, it is proving to be troublesome as many buyers are holding out for the announcement of the RTX 4000 series.

Is it the right time to buy Graphic Cards?

Tom’s Hardware reports an overall drop of 57% in prices of GPUs in 2022. Many gamers might inevitably get tempted to cash out on those cheap used GPUs flooding the market. However, it is essential to note that most used GPUs are from ex-miners. 

As the value of crypto is way less now, it is less beneficial to run cryptocurrency mining. So, miners are getting rid of their hardware by listing them at tempting deals.

 The trouble with GPUs used for mining is the degraded performance. Unfortunately, the chances of their failure are very high. Some people say that mining has a drastic impact on the memory chips of GPUs.

So, pros advise staying clear of the used GPU market. You can play the waiting game and wait for the next generation of GPUs to release from NVIDIA and AMD. It will allow the current generation of GPUs to be available on sale.

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