Nvidia is officially intimidated by ATI's latest RV770 chip. The chip is much smaller, but at the same time and for half the price of its flagship GT200 it delivers a lot of performance.

Nvidia didn't expect this and no one actually foresaw it, but it looks like ATI has surprised Nvidia more than we originally thought.

Nvidia is working on its GT200 55nm version, but the big question today is if this be enough to challenge the RV770XT-based Radeon HD 4870.

Radeon HD 4870 sells for €223 in European e-tail, while Nvidia's flagship Geforce GTX 280 is available for €450, or twice as much money.

Nvidia needs to drop prices to make its cards more attractive, but the big question is how much do they need to drop the price to fight ATI’s latest RV770 based offering. It doesn’t look that Geforce 9800 GTX+ will help much, either, and Geforce GTX 260 is too expensive to sell against Radeon HD 4870.

One thing is certain, it is not cool to be Nvidia’s sales representative; but we warned Nvidia on many occasions not to get arrogant, but of course they haven’t listened. What goes around comes around and Nvidia partners now have a much better negotiating position than a few months ago.