But why did they jump so high to begin with?
Assumed Superiority
Pre-built PCs are of the devil. At least, that’s what PC-Build forum elites will have you believe. If you didn’t pick out each part individually to make the most mathematically perfect device you possibly could, what are you even doing with your PC? Playing Hello Kitty Island Adventure? Pleb.
PC gaming rig subcultures can range from cool to sucky depending on who’s running the forum you’re visiting. Some are great, and they genuinely want to help kids just starting out with their devices. They keep baseline equipment reasonable and establish product tiers so no one part is bottlenecking others too hard. Others will insist users have the top-of-the-line hardware for their rig, even if it’s nearly too expensive for them. It must always go faster, there is no slow down. There is no stop. Only. Faster.
If you’re going to upgrade your device, there’s no point in taking a pit stop to save up for the next GPU. In fact, if you’re having a hard time affording it, maybe you should sell the GPU you’re currently using before you have a replacement lined up, just so you have a more accurate picture of your budget. (this is bad advice, don’t do this).
PC forums like the latter only build more hype for a hard-to-find item, and folks who follow them closely might feel like a GPU is worth double or triple what the manufacturer is actually charging for it – an unhealthy mentality with any high-price item market.
Enter: NVIDIA parts, specifically GPUs.
The Nvidia GeForce RTX 3080. A fabled card destined to descend from the heavens and sell out immediately, then disappear for months. The initial sales price for the units in the newly released set went from a low of $499 to a high of $1,499 over the three performance options. The RTX 3080 was the middle-of-the-road unit, and it came with “serious 4K gaming performance, with access to the latest ray-tracing and deep learning supersampling (DLSS) tech from Nvidia” (Tom’s Guide).
Unfortunately, due to Covid-19 and an assortment of other factors, the company couldn’t restock for months, and they began selling out of their weaker units too. When a shipment finally came in, it was gone in seconds – people had bots poised and ready to make the purchase as soon as it was an option.
Market Exploitation
The manufacturers know that their primary market doesn’t screw around when it comes to very expensive, very powerful machine components. Quality is everything. Streamers, professional gamers, people hosting tournaments, and even people who just like to go really fast all camp out to get the newest, fastest parts as they become available. This isn’t the first chip that Nvidia released and then immediately ran out of, so they knew demand was going to be pretty high.
However, this was the first time it took months to get production levels up to demand. Not only was there a pandemic slowing down overseas shipping, Bitcoin mining became profitable again. For those of you who don’t know, the process boils down to “solve algorithm – verify transaction – get rewarded”. Bitcoin transactions are heavily encrypted, and the money itself is virtual. Verification is essential to making sure the same Bitcoin hasn’t been used somewhere else first.
Anyway, cryptocurrency mining is very GPU-intensive. The reward goes to the person who verifies the transaction first, and multiple people can compete for each transaction. The only way to ensure you’re ahead of the guy with the supercomputer is to keep your device as fast as possible, and the GPU is a common bottleneck for Bitcoin miners. If you’re really making money off mining, then paying double the price for a scarce item that will keep you ahead seems like a good deal, and you’ll stay in line for a GPU selling on eBay while gamers leave and re-evaluate.
Arms Race
The pandemic keeping people inside, the pandemic preventing overseas shipping, the pandemic shifting the market and launching Bitcoin into another peak, the pandemic… everything wrong with the GPU market could theoretically be tied to the pandemic. All of it together creates a shortage of GPUs at every level, but new GPUs ran out first.
A new GPU on the market creates a cascade of used GPUs that trickle down. The used computer parts economy is actually pretty interesting, as depending on what part of the cycle you step into, the used part may cost more than the launch price of the new one. Memes to this effect flooded the market once users who’d sold parts in hopes of getting the 3080 realized everything was either out of stock or pretty scarce. Everything worth having, at least.
It’s not all bad: many of the folks waiting for the newest series learned to appreciate their old cards! A GPU in the PC is worth two in the void.
This is the downside to the more intense PC-building communities. There’s pressure to not stop and wait, and pressure to not settle for a less powerful (but still adequate) device if perfection is available for double or triple its actual price. (Please note here – I’m not talking about people who had a card break right before launch and decided to wait for it.)
This mentality creates poor-quality markets with a lot of demand and nearly no supply. The perfect environment for scalping.
Scalping
As mentioned before, the used-part life cycle is really interesting. People look to upgrade when something new comes out, so they upgrade to something new and sell off their old GPU. That GPU becoming available on the market allows another person to let go of their old GPU and purchase a faster model than what they currently have. GPUs are durable, so barring a major part failure, they’ll last a while in this cycle. The gist of all of this movement is that 1st tier items become 2nd and 3rd tier when the next generation comes out, and everything moves down a peg in the wishlists.
Scalpers see this and disrupt it. The goal is to eat up available supply to drive up demand, and then resell those devices they hoarded – er, stocked up on – at the new, higher price. Now only 4th and below tier items are available at the original price! High-end GPUs are beginning to cost the same as used cars, so trying to get in on it should be a risky investment, but high-priced electronics have their own rules. If everyone waited for prices to lower, everyone but the scalper comes out better for it.
This does not happen. It didn’t happen with the Wii. This didn’t happen with the Playstation 5. It won’t spontaneously happen with GPU scalpers, not only because it wouldn’t happen anyway, but also because this is a particularly terrible year for supply. If you’re not getting it from a scalper or reseller, you may not be getting it at all! Previous years, it was possible to look at scalper’s markup as a fee for early access, while other folks waited for a restock. This year…
Blown Manufacturing
The first pandemic year was ugly for many reasons.
The lack of supply for the electronic is inevitably what drives scalpers to buy as much of the final product as they can, and we see this time and time again with other products. Why can’t the manufacturer do something about it?
The most common suggestion is buy limits, but buy limits are tricky. Multi-person households may not want to share a PS5, even though they’re ordering to the same address. This doesn’t include portable electronics like the Switch, where children may genuinely just want their own Switch, like they did for the DS series, even though they’d share a PS5. GPUs are much the same! Streamers who can’t afford to have downtime may be looking to buy a backup, and are they wrong for that? If more than one streamer is living at an address (this is surprisingly common) there’s going to be a suspicious number of cards going to one location.
They may not even want to curb the scalping, because even scalping is profitable.
Don’t forget about profits. Buy limits cut down profit if the manufacturer doesn’t do as well as it’s hoping. Some theorize that Nintendo doesn’t make enough of it’s products on purpose so it always sells out and always has demand. Widgets and electronics are expensive to make, and initial release may be the only time they can charge full price without being undercut by market forces, sales, and secondhand devices coming on the market. Besides, it’s easier to make more of a successful item than it is to get rid of unsuccessful items and still make profit.
There’s also the option of increasing supply, which would make scalpers irrelevant. See again PS5 and Wii – more did come out after the initial release burst. However, this isn’t an option right now either. Overseas trade is just now getting back to normal. The Nvidia chip was out out. This gave the scalpers inordinate power.
Long story short, this is a complicated, multifaceted issue. The best thing you can do is wait if you can afford to. If the chip’s working fine, and you’re not already experiencing bottleneck, wait it out. Patience is bad for scalpers but good for you!
Sources:
https://www.bbc.com/news/technology-55755820
https://www.tomshardware.com/news/terrible-time-to-buy-gpu-late-2020
