Nvidia : Market Manipulation

Krenum

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A recent video by Jayztwocents pointed out a call for quarter earnings where Jensen came out and said that they are going to manipulate the market.

Here is the call
https://seekingalpha.com/article/45...g-on-q2-2023-results-earnings-call-transcript


Here is the market manipulation remark.

Jensen Huang


Yes. Thanks, Colette. C.J., our sell-through is off the highs in the beginning of the year, but it’s still very solid. In fact, sell-through is -- has increased 70% since pre-COVID, pre-pandemic. And so, it’s very clear that gaming is -- the fundamentals of gaming are strong, and this medium is really doing well. Not to mention the gaming platforms are being used -- our gaming PCs are being used for influencers, people sharing content, creating content, V bloggers, VTuber, there’s all kinds of new ways of engaging and spending time with video games.


Our strategy is to reduce the sell-in -- reduce the sell-in this quarter, next quarter to let channel inventory correct. Obviously, we’re off the highs, and the macro condition turned sharply worse. And so, our first strategy is to reduce sell-in in the next couple of quarters to correct channel inventory. We’ve also instituted programs to price position our current products to prepare for next-generation products.


Ampere is the most popular GPU we’ve ever created. It is in the top 15 most popular gaming GPUs on Steam. And it remains the best GPUs in the world, and it will be very successful for some time. However, we do have exciting new next-generation coming and it’s going to be layered on top of that. And so, we’ve taken -- we’ve done two things. We’ve reduced sell-in to let channel inventory correct and we’ve implemented programs with our partners to price position the products in the channel in preparation for our next generation.


All of this we anticipate were working towards a path to being in a good shape going into next year. Okay? So, that’s what our game plan is.


Here is the video from Jay if you like him
 

Krenum

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That's not market manipulation. Nvidia is under no obligation to sell the 40 series until they want to, or not at all. More YT clickbait.
Although you have the option to view what he said, I gave you both, either the direct website or YT.

How is it not market manipulation?

"Our strategy is to reduce the sell-in -- reduce the sell-in this quarter, next quarter to let channel inventory correct"

When you obviously have the inventory, but choose to limit the supply, obviously you're manipulating the market to keep your product on the demand side. Its not a hard concept.
 

Krenum

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Nvidia is not the only company that tries to control the pricing and inventory levels of their products. It's simple BAU procedure. Not sure what Jay was getting at in that video.
I think what he's getting at is , all these companies got used to charging whatever they wanted for their products during the pandemic, now that they can no longer use the pandemic as an excuse to charge outrageous prices, they are shifting their strategy to more insidious measures.

Which is fine, companies can do what they want, but its good to have the information on hand so you can use it to make a buying decision.
 

sfsuphysics

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Market manipulation is what industry does, as long as it's not illegal (and some case even when it is) they will do it to maximize profits. Now me as a consumer absolutely hates this, I understand it exists but I hate the fact that it does.
 

kirbyrj

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Nvidia is not the only company that tries to control the pricing and inventory levels of their products. It's a simple BAU procedure. Not sure what Jay was getting at in that video.

Exactly. This is all about nothing. And I generally don't give Nvidia the benefit of the doubt either.

What's next? AMD is manipulating the CPU market by undercutting Intel's prices to move product and gain marketshare?
 

schoolslave

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I think what he's getting at is , all these companies got used to charging whatever they wanted for their products during the pandemic, now that they can no longer use the pandemic as an excuse to charge outrageous prices, they are shifting their strategy to more insidious measures.

Which is fine, companies can do what they want, but its good to have the information on hand so you can use it to make a buying decision.
Exactly this. We all knew those “inflated” GPU prices were going to be the norm for new launches in the future. There’s no way Nvidia will back down - especially since they didn’t even get to taste the increased reseller-pricing themselves for the most part.
 

Zarathustra[H]

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How is it not market manipulation?
"Our strategy is to reduce the sell-in -- reduce the sell-in this quarter, next quarter to let channel inventory correct"

Their strategy does make sense, even from a non-nefarious perspective.

They know they have a little excess inventory in the channel of 3xxx series right now due largely to the slowdown in crypto, and many Gamers waiting for next gen. They also know they will have a little more production capacity than desired for next gen, as they have committed to contracts with TSMC that TSMC won't let them get out of now that the market conditions have changed. They just want to make sure they are not over-producing now, so that they can minimize as much as possible the steep discounts they will need next gen, to move the production capacity they have committed to.

That's not really market manipulation as much as it is running their business, and trying to make the best of what likely will be a much more difficult generation for them than last one.

Any company has the right to decide how much they want to sell. It doesn't really become "market manipulation" until they collude with other players in the market to affect the market as a whole.

That said, given that we pretty much have a duopoly, they can still have an outsized impact by doing so. This is one of the reasons research shows you don't have a truly competitive market until you have 3-5 viable players.

Businesses are free to decide how much product they can and want to produce and sell into a market, but in a competitive market, the assumption is that any one business can do as they please without having a major impact on the market as a whole, as other players will react to any shortages by taking advantage of the situation and boosting production. In a monopoly this certainly isn't the case, and that's why we have laws that cover monopolies (but that sadly aren't enforced enough).

In a duopoly it is a little bit more difficult. AMD could certainly take advantage of a shortage and try to boost production a bit to make up for it, but they are only one company, and they may also decide that less production means less work for higher prices and just decide not to. Or they may not have the means to boost production with their silicon fab contracts which are usually decided way in advance.

Our laws are a little weak in this area. In order to take any action the DOJ would have to have evidence of collusion or coordination between the two companies in an effort to manipulate the market, and this is extremely difficult to prove in most cases.

The Anti-trust division of the FTC uses a formula to determine market share to prevent overly concentrated markets called the Herfendahl-Hirschman Index (or HHI). If followed precisely it does not just prevent monopolies from forming, but also prevents mergers and acquisitions if they would result in overly concentrated markets, and should result in the magic 3-5 viable competitors figure.

That said, the FTC is very political. In some administrations the anti-trust division of the FTC is given broad leeway to regulate mergers and acquisitions, other administrations are more "business friendly" and fail to take action. They are also underfunded and outgunned by private sector lawyers who will fight their suits to block these transactions on all sorts of grounds. A popular one comes down to just how you define the market. We might say that Nvidia is just one of two discrete PC GPU manufacturers, and any growth on their part constitutes a dangerous impact on the PC GPU market. A lawyer for the companies might argue that Nvidia is just one of several chip design houses on the market including Intel, AMD, ARM Holdings, Imagination Technologies, Qualcomm, Apple, etc. and argue that it is completely innocuous for them to absorb a competitor in such a large, varied and competitive market.

Sadly, the judges in these cases are usually old, and not very tech savvy and often buy many of these arguments.

That said though, the current duopoly was not created by mergers and acquisitions. It was created by competitors going out of business (3DFX) or dropping out of the market (Matrox, S3, Rendition, etc.) The only regulatory power you'd have here would be to break up the big players, but this isn't something we even seriously consider until there is a real single player monopoly, for obvious reasons, as it is difficult, messy, and something we struggle with when it comes to our American view of property rights being absolute. It has to get pretty extreme before actions like these are taken, and we are nowhere near that.

Even if we were at that point, how would you break up Nvidia? The only way that would make sense would be to somehow separate their different divisions from each other, which would still leave you with a consumer/gaming GPU division that is dominant in its market.

This is why there have only ever been three anti-trust breakups in U.S. history, the last of which was the 1982 breakup of AT&T.

Either way, there are side effects of things companies legitimately and rightfully do, especially in a highly concentrated duopoly, that our anti-trust legal regimen really doesn't have much to say about, and that's not about to change any time soon. For business planning purposes Nvidia absolutely has to be able to make decisions on production numbers. A business can't function without doing so, but at the same time, since they are the biggest of only two players, these decisions DO have some market impact, which is seemingly unavoidable.
 
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sc5mu93

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absolutely market manipulation. but not illegal.

Hopefully AMD with Navi 3x can burn them, and make the artificially propped up 30 series and 40 series prices look stupid.

nothing unexpected from Nvidia.
 

FrgMstr

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Well, he would have to truly understand the GPU business in order to be making such statements. This video only underlines his ignorance of how the channel operates. I am no Nvidia defender, however the AIBs are drowning in inventory currently, and having huge inventories rolling into year-end is never a good thing. Cash flow in the video card business is king, and that is being extremely hampered at the moment. Control of the channel has been lost and Nvidia is simply trying to reel that in the only way they can.
 

TheHig

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Yeah and Nvidia has the mindshare and sets the price/performance tiers and AMD is going to price close to that. Profits are better for both parties that way. Most every generation has some price parity with the occasional shake up when AMD undercuts at one tier like the RX 480 8g vs the 1060 6g. I would argue that our GPU duopoly inherently plays ball with one another. Now the last few years have been a wild ride and who knows maybe some price wars are due?
 

Halon

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Nvidia: Doing good business for their shareholders?
That is their foremost responsibility, or at least in their top three. Barring other serious factors it's trivially easy to get sued for not making it your priority as a business leader. This is a non-story: they have an existing glut of Ampere inventory due to a new global recession rolling in combined with miner ennui. They have every right to forestall a new product release or carefully manage it in order to manage inventory and do what they can to prevent their partners from getting burned.

Making content for bug-eyed video game addicts wondering how they'll get their next big fix must be horrible.
 

lopoetve

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Although you have the option to view what he said, I gave you both, either the direct website or YT.

How is it not market manipulation?

"Our strategy is to reduce the sell-in -- reduce the sell-in this quarter, next quarter to let channel inventory correct"

When you obviously have the inventory, but choose to limit the supply, obviously you're manipulating the market to keep your product on the demand side. Its not a hard concept.
That is not the definition of market manipulation. That's choosing to sell inventory or not, or change prices (or not), to generate revenue at the level you wish. Market manipulation has a very specific definition, and is ~not public~ information like this. AMD can listen to this the same as any other consumer and make their own decisions.
 

FrgMstr

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That is not the definition of market manipulation. That's choosing to sell inventory or not, or change prices (or not), to generate revenue at the level you wish. Market manipulation has a very specific definition, and is ~not public~ information like this. AMD can listen to this the same as any other consumer and make their own decisions.
Bingo.
 

aliaskary77

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Hopefully AMD with Navi 3x can burn them, and make the artificially propped up 30 series and 40 series prices look stupid.
I always hope AMD does this, but then they come out priced higher then they should (referring to GPUs). They always fail to provide enough value proposition to convince more people to switch from NVIDIA.
 

Ranulfo

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Well, he would have to truly understand the GPU business in order to be making such statements. This video only underlines his ignorance of how the channel operates. I am no Nvidia defender, however the AIBs are drowning in inventory currently, and having huge inventories rolling into year-end is never a good thing. Cash flow in the video card business is king, and that is being extremely hampered at the moment. Control of the channel has been lost and Nvidia is simply trying to reel that in the only way they can.

If anything in the past two months, hopefully Jay has learned something about the video card market. Going from buy now, prices aren't going to drop back in two July videos to pointing out the obvious (what nvidia did in 2018) is some sort of improvement.
 

Zarathustra[H]

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Well, he would have to truly understand the GPU business in order to be making such statements. This video only underlines his ignorance of how the channel operates. I am no Nvidia defender, however the AIBs are drowning in inventory currently, and having huge inventories rolling into year-end is never a good thing. Cash flow in the video card business is king, and that is being extremely hampered at the moment. Control of the channel has been lost and Nvidia is simply trying to reel that in the only way they can.

Yeah, he should have stuck to what he was good at.

10 years ago, he had the best "intro to water cooling" videos on youtube, showing beginners how to build custom water loops.

He was a big goof, but these videos were quite helpful to many.

Now he has a bigger budget with more polish, but just releases drivel.
 

HeadRusch

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Yeah, he should have stuck to what he was good at.

10 years ago, he had the best "intro to water cooling" videos on youtube, showing beginners how to build custom water loops.

He was a big goof, but these videos were quite helpful to many.

Now he has a bigger budget with more polish, but just releases drivel.

Because he's a 40 year old man-child who has to try and compete with LTT, and others who are perhaps more established or have a better consistent format for what they deliver..........he, like Kyle/Bitwit........pretty much superfluous.......
 

vegeta535

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I really don't care about those three. I didn't mind bitwit too much til he got divorced. His channel took a nose dive since then. Paul has no personality and can't bare to listen to him talk. Jay just doesn't care anymore either. His passion seemed to move on to cars.
 

FrgMstr

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Yeah, he should have stuck to what he was good at.

10 years ago, he had the best "intro to water cooling" videos on youtube, showing beginners how to build custom water loops.

He was a big goof, but these videos were quite helpful to many.

Now he has a bigger budget with more polish, but just releases drivel.
Agreed, his cooling content was top notch. However thinking just because you know how to overclock a video card does not turn you into a GPU reviewer nor a GPU business analyst. He is a baffoon at the latter two even on his best day.
 

cjcox

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Exactly. This is all about nothing. And I generally don't give Nvidia the benefit of the doubt either.

What's next? AMD is manipulating the CPU market by undercutting Intel's prices to move product and gain marketshare?
Jayz wouldn't cover that. However, if buying AMD means spending a fortune now... err.. wait a minute:
 

DukenukemX

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Nvidia: Doing good business for their shareholders?
Nobody here should care about their shareholders unless you yourself are one. The shareholders are competing against consumers for attention as consumers are no longer the priority. Nvidia's most popular GPU is Pascal according to Steam's hardware survey. If Ampere sold the most, it clearly isn't being used for gaming. AMD is supposedly on track to release RDNA3 this year... unless AMD is working with Nvidia and will delay it until next year. AMD hasn't given a clear release date themselves as they said RDNA3 will be released at the end of this year. There's also Intel.

Jensen Huang statement about demand being lower is incorrect. The demand is lower at those prices. Lower prices and those cards will fly off the shelf.
 

Verge

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Jensen Huang statement about demand being lower is incorrect.
I vehemently disagree with you, and wonder where you are getting this information. About 20 million GPU's are going to flood the market in 2 weeks.
 

Ranulfo

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Nobody here should care about their shareholders unless you yourself are one. The shareholders are competing against consumers for attention as consumers are no longer the priority. Nvidia's most popular GPU is Pascal according to Steam's hardware survey. If Ampere sold the most, it clearly isn't being used for gaming. AMD is supposedly on track to release RDNA3 this year... unless AMD is working with Nvidia and will delay it until next year. AMD hasn't given a clear release date themselves as they said RDNA3 will be released at the end of this year. There's also Intel.

Jensen Huang statement about demand being lower is incorrect. The demand is lower at those prices. Lower prices and those cards will fly off the shelf.

Newest Steam Survey says Ampere just edged out Turning cards. Edit: Pascal not Turing.

Via https://www.tomshardware.com/news/nvidia-rtx-most-popular-according-to-steam

Ampere is at 21.7% vs 20.1% Pascal.
 
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NickJames

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I vehemently disagree with you, and wonder where you are getting this information. About 20 million GPU's are going to flood the market in 2 weeks.
Anticipating the Ethereum merge causing a GPU dump? If that's the case then demand will definitely plummet for retail.
 

Zarathustra[H]

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Jensen Huang statement about demand being lower is incorrect. The demand is lower at those prices. Lower prices and those cards will fly off the shelf.

Well, demand is never completely independent of price, that is true. That is how supply and demand work. At a low enough price, people will even buy pine cones.

That said, the mining market is pretty much offline right now, and dumping their existing cards on the market.

New cards have been drastically reduced in price since their highs, with some reports of 3090TI's going for $800 new, and they still have excess inventory. So yeah, there has been a reduction in demand.

I vehemently disagree with you, and wonder where you are getting this information. About 20 million GPU's are going to flood the market in 2 weeks.

I think it depends on what you consider demand.

Gaming demand is as strong as ever, but some are waiting in anticipation of what the next gen will bring.

Mining demand has dropped off a cliff, and in a way even gone negative, as their inventory is being sold off used.

Nvidia conveniently did not distinguish between these two types of demand, which is why they got sued by their shareholders a while back.
 

HockeyJon

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Although you have the option to view what he said, I gave you both, either the direct website or YT.

How is it not market manipulation?

"Our strategy is to reduce the sell-in -- reduce the sell-in this quarter, next quarter to let channel inventory correct"

When you obviously have the inventory, but choose to limit the supply, obviously you're manipulating the market to keep your product on the demand side. Its not a hard concept.

No, it's not market manipulation. Their AIB and retail partners don't want to be left with stranded inventory no one wants, and they want to sell off the excess inventory before pushing new products out to market. Nothing about that is sketchy, nor is it illegal. It's actually quite standard.

This is clickbait nonsense by Jay, but he got his clicks and made his money, ironically by psychologically manipulating his audience via rage clicks.
 

ChadD

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It is only manipulation...
IF
OEMs are placing orders for Nvidia chips to put in cards... and Nvidia is taking the orders and not shipping.

If Nvidia is taking orders and are clear that they will not be shipping until X day. That is not manipulation.

The truth and we all know it, is OEMs are not looking to make more cards they are sitting on stock. The companies they sell to... the Wholesalers like Ingram Micro are also not placing orders for more cards. So there is no manipulation going on. As others have said Nvidia is under no obligation to ship anything.

Jay misses how the industry really works often... its hard to listen to him sometimes. He wines about OEMS and retailers... its like he doesn't understand the Wholesalers in the supply chain are the real issue right now. Companies like IM do 55 BILLION in business every year... OEMS don't sell to micro center or best buy and for sure they don't sell directly to mom and pop shops. IM does. IM during the Crypto run like every other wholesaler... was opening direct accounts for Crypto farmers. To fill their orders they where ordering twice the amount of product. They just got stiffed for half their inventory... Nvidia could release the entire line of 4000 cards today, IM and other wholesalers would either NOT stock them... or demand Nvidia instantly rebate them for the millions in 3000 cards sitting in their warehouses.

Having said that... considering AMDs stock issue although they have on is also not as sever. I REALLY REALLY hope Lisa sees the opportunity AMD has right now. (assuming of course they actually are getting good yields) Instead of following Nvidia here... she needs to drop the entire 7000 line at the end of November and get stock out there as fast as possible. Make sure the AMD chips are going to OEMs that aren't in Nvidias pocket and ramp up supply on Mid range parts. FORCE Nvidia to either drop mid range 4000s sooner then they would like or discount the hell out of 3080s. lol (they likely won't) They would also be dealing with middle man companies that wouldn't want to get stiffed with tons of NV product... still they wouldn't do anything actually shady to stop AMD either.
 

Lakados

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Nvidia conveniently did not distinguish between these two types of demand, which is why they got sued by their shareholders a while back.
And they can’t distinguish with out the aid of their drivers reporting back usage statistics from gforce experience, so they can only say with certainty how many gaming CPU’s were sold they have no accurate means of then saying what they are used for.
 
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