To The Moon

As of Friday, April 5, 2025, NVIDIA ( $NVIDIA(NVDA)$ ) closed at $94.31, down 7.36%, while AMD ( $Advanced Micro Devices(AMD)$ ) closed at $85.76, shedding 8.57%. These declines come amid swirling rumours about new GPU releases—NVIDIA’s RTX 5060 Ti and AMD’s Radeon RX 9060 XT—and growing concerns over tariff policies inflating supply chain costs. With both companies potentially opting to maintain current pricing or engage in a price war, their gaming divisions’ revenue, profit margins, EPS, and stock prices hang in the balance. Here’s a closer look at how these dynamics might unfold.

Nvidia

AMD

New Product Rumors Set the Stage

Reports suggest NVIDIA is gearing up to launch the RTX 5060 Ti on April 16, 2025, with 8GB and 16GB variants priced at $399 and $499, respectively—mirroring the RTX 4060 Ti’s pricing strategy. Meanwhile, AMD’s rumoured RX 9060 XT could hit shelves later in Q2, potentially undercutting NVIDIA at below $400. These moves hint at either a steady pricing approach from NVIDIA or a brewing price war if AMD opts for aggressive discounts. For consumers, this could mean better deals, but for the companies, the financial stakes are high, especially under current tariff pressures.

Gaming Division: Revenue and Profit Margins

• NVIDIA’s gaming segment, driven by GeForce GPUs, posted $11.4 billion in revenue for fiscal 2025 (ended January 26, 2025), a modest 9% year-over-year increase. However, it accounts for just 8.7% of its $130.5 billion total revenue, overshadowed by its AI-driven data centre business. The segment’s operating profit margin stands at an estimated 37.8%, bolstered by NVIDIA’s 74% GPU market share and premium pricing power.

• AMD’s gaming division, encompassing Radeon GPUs and semi-custom chips for consoles like PlayStation and Xbox, generated $6.2 billion in fiscal 2024 (ended December 28, 2024), down 9% year-over-year. Representing 27.3% of its $22.68 billion total revenue, it’s a more significant pillar than NVIDIA’s gaming arm. Yet, its operating profit margin lags at roughly 13.7%, dragged down by low-margin console sales and competitive pressure in the GPU space.

NVIDIA’s higher profitability gives it a buffer, while AMD’s reliance on gaming revenue makes it more vulnerable to cost shocks or pricing battles.

Tariff Pressures on Supply Chain Costs

With tariffs looming—potentially 25% on Taiwanese semiconductors (where TSMC produces both companies’ chips) and 10%-25% on other components like memory and cooling systems—supply chain costs are rising. Estimates suggest production costs could increase by 10%-15%. NVIDIA, with a 75% gross margin, might absorb or pass on half of this burden, while AMD, at a 50% gross margin, may struggle to offset more than a third. For NVIDIA’s gaming unit, this translates to an added cost of roughly $1.4-$2.1 billion annually; for AMD, it’s $2.2-$3.3 billion—proportionally larger given its lower revenue base.

If NVIDIA holds RTX 5060 Ti prices steady at $399-$499, its profit margins could shrink slightly unless offset by AI gains. AMD, facing a potential RX 9060 XT launch below $400, risks further margin erosion in a price war, especially with its thinner profit cushion.

EPS Impact: A Tale of Two Companies

The tariff-driven cost increase could dent earnings per share (EPS), though the impact varies sharply between the two:

• NVIDIA: With a fiscal 2025 net income of $60.9 billion and 2.5 billion shares outstanding, its EPS is approximately $24.36. A $1.4-$2.1 billion cost hit to its gaming segment (less than 0.5% of total profit) might trim EPS by $0.06-$0.09, a decline of 0.25%-0.37%. Its diversified revenue—87% from data centres—softens the blow.

• AMD: Assuming a 2024 net income of $1.2 billion and 1.6 billion shares, its EPS is around $0.75. A $2.2-$3.3 billion cost increase, hitting 18%-27% of profits, could slash EPS by $0.14-$0.20, or 18.7%-26.7%. With gaming a larger slice of its pie, AMD feels the pinch more acutely.

These estimates assume partial cost pass-through and no major pricing shifts. A full-on price war could amplify the damage, particularly for AMD.

Stock Price Implications

Friday’s sell-off—NVDA down 7.36% to $94.31 and AMD down 8.57% to $85.76—reflects market jitters over tariffs and competition. NVIDIA’s P/E, currently at 37.90, might tick up slightly to 38.00-38.05 with the EPS dip, suggesting a minor stock price adjustment (perhaps a 0.3%-0.5% dip to $93.90-$94.00) if sentiment holds. Its AI growth narrative likely keeps investors sanguine.

AMD’s P/E, around 40, could balloon to 49-55 if EPS falls sharply, signalling a potential 20%-25% stock drop to $64-$68 unless the market adjusts its valuation downward. A price war victory might boost volume but at the cost of profitability, testing investor patience.

Conclusion

NVIDIA’s RTX 5060 Ti pricing strategy—steady or competitive—seems sustainable, with tariffs barely denting its EPS and stock price thanks to its AI dominance. AMD’s RX 9060 XT, if priced aggressively, could spark a price war, but its slimmer margins and tariff exposure threaten a significant EPS hit and stock volatility. For consumers, cheaper GPUs are a win; for shareholders, NVIDIA looks like the safer bet in this tariff-laden landscape.

@TigerWire