According to market researcher Susquehanna, the retail price of GPUs fell by 36 percent in the past quarter. Reuters speculates that the end of the chip shortage is in sight.

Susquehanna’s figures are in line with 3DCenter.org, a market researcher that recently reported a GPU price drop of 25 percent. The previous low took place in 2020, just before the global supply chain was hit by COVID-19. GPU manufacturers have been facing a shortage for the past two years. Demand grew faster than supply, causing prices to rise.

The new low has several explanations. A number of factors are pressuring the global demand for GPU’s, causing the price to drop. Large Chinese cities are locked down, which reduces the purchasing power of residents. The Russian market has been impenetrable ever since its attack on Ukraine.

Moreover, the demand for GPUs is linked to the demand for crypto mining. GPUs are popular among miners. In early 2022, Ethereum — one of the largest coins — announced a change that reduces the cost efficiency of GPUs.

From chip shortage to surplus

All in all, the price drop says more about the demand for GPUs than the supply of chips. Yet, the two are intertwined. Reuters speculates that the price drop foreshadows the end of the chip shortage.

Whenever the demand for GPUs drops, manufacturers may respond by cancelling chip orders and slowing down production. Chip demand drops, and chip prices drop correspondingly. Chip manufacturers are forced to cut prices to stay competitive. The same manufacturers are currently building new factories to make up for the shortage. Chip prices may fall sharply in the long term.

Market researcher TechInsights suspects that the chip shortage will shortly cease. “We see a glut coming that extends beyond graphics chips”, said analyst Dan Hutcheson. “Manufacturers expected the shortage to last until 2023 or 2024 and are investing heavily in new fab locations.”