How about a Radeon R9 290X for 900 bucks?

— 12:16 PM on February 14, 2014

If you've been following these things at all, you probably know that the Radeon R9 290X and its little brother, the R9 290, have been selling at steep premiums for a while now. The 290X's suggested list price is $549, and the 290's is $399. Although both cards have been relatively easy to find in stock at online retailers, they've been going for something like $200 above list.

The problem is one of supply and demand, of course. Resellers are raising prices in the face of scarcity.

One trend has created a major distortion in the market on the supply side: crypto-coin miners have evidently been snapping up high-end Radeons like mad in order to build mining farms. Today's Radeons happen to be unusually good at crunching the make-work algorithms used by coins like Litecoin, and that makes them essentially money-printing machines. As long as the power consumption and other costs work out right, it's possible to reap a calculated profit by mining coins with these cards. That profit can be converted from virtual coins into very real money, and as you might imagine, that's made these Radeons hot commodities.

In fact, they're such hot commodities that R9 290X prices have hit a new high-water mark at Newegg, as indicated in the screenshot above. Multiple versions of the R9 290X are in stock, but they're now priced at a penny shy of 900 bucks. There are a couple of cards priced slightly lower, including an MSI at $849.99, but that's it. The marginally slower R9 290 is selling for between $650 and $750. Even the R9 280X, which is almost identical to the two-plus-year-old Radeon HD 7970 and is supposed to sell for $300, is going for $550-580 right now.

That's... just a bit above list.

The e-tailer has placed limits of three to six cards per customer on most of these products, which at least suggests that bulk purchases of 290 and 290X cards may have been depleting stocks.

The demand for Radeon R9 cards is definitely healthy, but the unfortunate part of this situation is that gamers have been effectively priced out of the market for high-end Radeons. If you're looking for this class of graphics card, the GeForce GTX 780 is a much better deal. It's selling at around its $500 suggested price. But fans of AMD and gamers who, for whatever reason, would tend to prefer AMD's latest offerings are faced with an unhappy choice.

In situations like this one where graphics card prices are being buffeted by the forces of supply and demand, we often have trouble discerning how much of the blame to assign to strong demand and how much to chalk up to poor supply. Several years ago, scant supply of 40-nm GPUs from TSMC made both AMD and Nvidia GPUs scarce. At other times, one of the GPU makers has simply missed on its estimates of demand for its latest products, leading to poor availability and a shift in market share to the other team. Supply-side problems do happen. However, the GPU makers are very reluctant to share hard numbers about the quantities of chips they are shipping, both for competitive reasons and because of SEC regulations against that sort of disclosure in the wrong forum.

That's probably why our inquiries to AMD about the current situation have been met with not particularly enlightening answers, like "supply is healthy, but demand is very strong." Who knows what that statement means without context? With that said, we do have some sources familiar with the situation, and they've indicated that the monthly quantity of new Hawaii GPUs coming into the market is relatively solid, if not spectacular, for this class of graphics chip.

If true, then the lion's share of the blame for the hefty mark-ups on high-end Radeons falls on the demand side of the equation.

Of course, AMD has the option of ordering much larger volumes of Hawaii chips, if it can secure the additional wafers from TSMC. Those chips likely wouldn't reach the market for several months at least, but AMD could pull the trigger at any time on an unusually large production run.

The trouble with doing so is that pretty much everyone observing the crypto-mining phenomenon expects the bubble to burst at some point. If and when it does, those coin miners who have assembled large farms will undoubtedly be looking to sell their graphics cards. AMD could be left holding big inventories of GPUs while a glut of slightly used high-end Radeons floods the secondary market via eBay and the like. That could be a financially damaging outcome, especially for a company in the midst of attempting a dramatic turnaround.

I'm sure AMD is enjoying its sales success, but my sense is that it recognizes the risk involved in its current position and will probably be fairly cautious when making forecasts and placing orders for GPUs. The firm seems to recognize that gamers, not coin miners, are its core customers.

The question is: what can it do to appease those core customers, when they have effectively been priced out of the market? Here's hoping the folks at AMD have some creative options in the works, because the present situation isn't great for gamers.

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