Pricewatch - There is trouble in Nvidialand. AMD’s new graphics cards apparently have surprised Nvidia, forcing Nvidia to sharply cut prices of its new cards. Sources told TG Daily that Nvidia is adjusting its marketing strategy to GeForce 8800 cards to avoid what has all the signs for a big sales decline on the high end. Of course, that means that it is a good time for graphics cards shoppers. Here’s some insight in what you can expect to find on the market.

Nvidia has been dominating the graphics chip market for some time now. In fact, the last troubles are about five years back, when Nvidia faced the ATI Radeon 9700-9800 series in 2002 and 2003 and Nvidia’s own GeForce FX turned into an embarrassment. The new GTX 200 looked like a solid design, but it appears that AMD’s Radeon 4800 is shaking the ground in Santa Clara once again and we may be seeing a time in which Radeon desktop cards are gaining market share again. Nvidia products are experiencing substantial price drops: Some GTX 200 series cards are now 25% cheaper than just a week ago.

Taking a quick look back down the memory lane, ATI hasn’t had an easy ride over the past four years. In 2004, the GeForce 6800 outperformed the Radeon X800 and brought support for DirectX 9.0c. In 2005, the GeForce 7800 slaughtered the Radeon X850 while the GeForce 7900 trumped the Radeon X1800/1900. The GeForce 8800 was introduced in November 2006 and remained on top until the debut of the GeForce GTX 280. Nvidia had a clear 18 month lead over AMD/ATI.

ATI’s back-from-the-dead announcement came with the release of the Radeon 3800 series. The GPU did not have
the success the ATI guys expected, but it was enough to show that there is still life in ATI. The law of graphics industry is very simple: If you screw up, one decent chip generation won’t brick you back. But the second can.

Today’s market has a simple competitive structure: The Radeon 3800 is battling the GeForce 9600GT, the Radeon 4850 is going against the GeForce 9800GTX and the Radeon 4870 is fighting the GeForce GTX 260. What brought a surprising element to this scenario is the fact that Nvidia did not expect that the Radeon 4800 might reach Nvidia’s level of performance. Now we are seeing new market dynamics that create problems for Nvidia and opportunities for AMD/ATI. Actually, we are noticing that AMD is gaining traction on a marketing level as well and is going after Nvidia wherever it can.

The prices mentioned below are the lowest we were able to find as of July 11.

Entry level

Looking at retail/etail price data provided by PriceGrabber.com, Nvidia is pressured on several fronts: The Diamond Radeon 3850 with 512 MB GDDR3 memory sells for as low as $99.99 (current average retail price: $121). On Newegg.com, we even found a $20 rebate, bringing the cost of the card down to just $79.99. Nvidia’s competitor is MSI’s passively-cooled GeForce 8600 GTS 512 MB, which costs $70.93. However, we have to note that a 3850 GPU will drive circles around the 8600 chip and may be the better deal. This concludes the low-end debate: Diamond’s 3850 with 512 MB GDDR3 is the most powerful $80 graphics card in the history of 3D.

Gigabyte sells its 3870 with 512 MB GDDR3 memory for $129.99, but Asus has a better deal with higher clocks and GDDR4 memory for just $125.99 after a $20 MIR check. The GeForce 9600 GT is a price competitor at $129.99 and some manufacturers even offer a $20 check, but this is not the deal you should be looking at: The best $129.99 card is BFG’s 8800GT 512 MB. The card delivers the full performance of the G92 chip, which makes the card our winner in this segment. However, Nvidia is phasing out the 8800GT - if you are looking for a deal, be quick. What makes the 8800GT even more interesting is the fact that Nvidia and retailers apparently are counting on this card to compensate for sluggish GTX 200 sales. So keep your eyes out for this product for a potentially good deal. More on that below.

Mainstream

As we’re moving higher in the price bracket, we are seeing more fireworks and better deals than at any other point in the history of 3D industry - at least as far as we can remember.

The Radeon 4850 was introduced as a $199 card. But if you are looking closely, you can find much cheaper cards, such as Palit’s board for $169.99 (including a $20 rebate). In the $149-199 range, you can find many GeForce 8800 GTS boards: The 320 MB and 640 MB versions are using the original 90 nm G80 chip, while 512MB boards integrate the 65 nm G92 chip. If you own a SLI motherboard and an older GeForce 8800 GTS, getting a second card might be a steal.

If you compare Radeon 4850 to GeForce 9800GTX (Nvidia’s preferred case scenario), we have a dilemma between Palit’s board for $169.99 and Zotac’s 9800GTX for $196.99 and free shipping. Our advice: Go for the cheaper card.

Read on the next page: Performance cards, Vendor struggles, Conclusion

Performance

Let’s spend some time on the GTX 200 series.

When the new GPU was launched, there was little hope that that ATI’s $299 cards could compete against Nvidia’s $449 models. However, exactly that has happened. Within two weeks, Nvidia decided to cut the prices of its GTX 260 and GTX 280 cards by $100 - $150. We found PNY XLR8 GTX 260 for $329.99 on Pricegrabber.com, down from a launch price of $449.

If you are looking for a deal, you might want to check Newegg.com, because EVGA currently has a $30 MIR, bringing the cost of EVGA’s GTX 260 896 MB card to just $299.99. This is only $5 higher than VisionTek’s Radeon 4870 512 MB, but the GTX 260 comes with 75% more memory. We also noticed the MSI Radeon 3870 X2 1 GB for $299 as well, but we do not recommend buying the old X2 card.

The GTX 2800 remains the highest performing card. Nvidia has no competition in this segment and prices are still coming down sharply. Average prices are below the $550 mark, while you can find some models for $499 and $469, if you include the $30 MIR. These cards are actually cheaper than 8800 Ultra cards, which are selling in the $550 range.

Vendor struggles

While we prepared this article, we talked to several industry sources, who requested to remain anonymous, and we are somewhat convinced that the current price cuts are just the beginning. The competition between Nvidia and AMD/ATI will become more serious.

For example, we heard that some vendors consider the launch of the GTX 260/280 series as "the worst product launch in the history of Nvidia" and Nvidia may be selling "less than 3000 GTX 260/280 cards per month" in the North American etail market. This scenario not only creates a huge problem for Nvidia, but also for retailers that are now trying to find solutions how to move their stock.

It seems that some large stores have given up on putting extra effort in promoting GTX 260/280 cards for now and are changing their strategy towards other products that are easier to sell. Interestingly, Newegg.com appears to be leading the charge, heavily promoting 8800 GT cards directly against the GTX 280: "Whatever your favorite game, an Nvidia GeForce 8800GT in SLI mode (that’s 2) provides the best bang-for-the-buck performance for less than $299," the promo ad reads.

Is it a move to save quarter sales or is Newegg just clearing out its inventory? Your guess is as good as ours. Our sources indicated that AMD/ATI will be reacting soon. So expect the rivalry between Nvidia and AMD/ATI to intensify. Watch the big etail websites to see the battle unfold.

Conclusion

This years’ Back-to-School season will see a level of competition in the graphics industry we haven’t seen in years. AMD is in the driver’s seat for now and will be bundling its Radeon 4800 cards with Phenom processors, offering even more savings (an additional $15-30), while Nvidia has to react. AMD’s graphics unit believes that it can hit a market share of 40% (up from 21% in the first quarter) and it will be interesting to see if that will be the case and what Nvidia will do to hang on to its market shares.

The winner, of course, is the consumer. If you were looking to get a new graphics card anyway, you are more than likely to be able to score a great deal this August. Big performance gains appear to be very affordable now.