Gaming Boom Sustainable Post-Pandemic, Says Nvidia CFO
Nvidia’s gaming demand is strong, “but our growth is continuing to be gated by supply,” Chief Financial Officer Colette Kress told Citi’s virtual tech conference Monday. “Channel inventory in the market is still low, and we continue to work on providing more supply into the channel to improve those scenarios.”
With channel inventory so low, “overall prices in the market are a little bit higher than what, I would say, manufacturer suggested retail prices are,” said Kress. “We have a ways to go in providing more of that inventory. We're starting to see prices decrease and therefore, make it more affordable and available to our gamers. But we're still working on that.”
Nvidia is working with all its supply chain partners and “ecosystems” to improve components availability, said Kress. “It’s very rare that we actually just sell chips. We are selling full platforms.” It’s incumbent on Nvidia “to think about the components that our partners and ecosystems must also procure to finish up those systems,” she said. “We're working across the industry to make sure that we are all working together to get that inventory to the market and to gamers.” The “entire process” involves “a lot of different companies working on providing more supply,” she said.
The company doubts it will be able “to serve all of the demand” anytime soon, said Kress. “You'll see us more and more with longer-term commitments” in the procurement chain, including with contract manufacturers “that help build out using the supply that we have,” she said. “Given the size of the company, we have quite a bit of optionality.” Nvidia is partnering with two “high-end fabs” to procure the wafers it needs, she said. “We're probably one of the only large companies that has such a strong dual-fab process.” The long-term nature of working together with the two fabs “has really helped us through this process,” she said.
The universe of gamers “continues to expand,” said Kress, when asked about the sustainability of the gaming boom post-pandemic. “Once a gamer, always a gamer,” she said. Gaming during the pandemic became so much more than one-on-one competition, she said. “Now it is a full entertainment sport” that meets the demands of “all different types of users,” from first-time to professional gamers, she said. There's also the people who are “just watching others game,” she said, estimating the global audience for esports is about 500 million. PC gamer participation on Steam, the “very popular” online platform, is up more than 20% year on year, she said.
The “strong and powerful market of laptop gaming” has also driven adoption during COVID-19, said Kress. “Laptop gaming infuses some of the best performance, but also in a thin and light offering.” More and more desktop-centric gamers are building their “second opportunity” with a laptop, fueling demand for Nvidia’s Ampere-branded high-performance computing infrastructure, she said. “We are well positioned heading into the holiday season with Ampere.”
Nvidia’s RTX graphics cards are adaptable “across all of our notebooks,” plus high-end desktops, said Kress. “We've got a great upgrade cycle ahead of us still.” She estimates 80% of Nvidia’s installed base “still has not upgraded to RTX, so we've got a great continued opportunity,” she said. “We're getting ready for the holiday season, and as we turn the corner to next year, we're still purchasing supply for long term to fuel this market.”