Nvidia is building a new business unit dedicated to producing custom chips for cloud computing companies and others, including processing for sophisticated artificial intelligence (AI).
In addition to trying to protect itself against the increasing number of businesses seeking to outdo it, the leading worldwide designer and supplier of AI chips hopes to carve out a piece of the rapidly expanding custom AI chip industry.
The corporation, situated in Santa Clara, California, dominates around 80% of the market for high-end AI chips. Because of its dominance, its stock market value has increased by 40% this year to $1.73 trillion, after more than tripling in 2023.
Laptops 1000Customers of Nvidia, which include OpenAI, the company that produced ChatGPT, Microsoft, Alphabet, Meta Platforms, and OpenAI, among others, have rushed to buy up the company’s dwindling supply of chips to compete in the rapidly developing field of generative AI.
For many of those large customers, the H100 and A100 processors function as a general-purpose, all-purpose AI processor. However, for certain purposes, IT corporations have begun to design their internal processors. By doing this, you can potentially cut down on energy consumption as well as design time and expense.
Nvidia is now making an effort to assist these businesses in producing custom AI chips that have flowed to rival companies like Marvell Technology and Broadcom.
“You can’t afford to go drop an H100 or A100 in there if you’re trying to optimize on things like power, or optimize on cost for your application,” venture capitalist Greg Reichow stated in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”
Prices for the H100, which are more expensive than those of the A100, are not disclosed by Nvidia; but, depending on volume and other variables, a single chip may sell for $16,000 to $100,000. This year, Meta intends to increase its entire stock to 350,000 H100s.
Laptops 1000Amazon.com, Microsoft, Google, and OpenAI met with Nvidia officials to discuss producing customized processors for them. Nvidia has targeted consumers in the video gaming, telecom, and automotive industries in addition to data center chips. Nvidia’s shares increased by 2.75%, contributing to the overall increase in semiconductor stocks. Shares of Marvell fell 2.78 percent.
Nvidia stated in 2022 that it would permit its third-party clients to include a portion of its exclusive networking technologies in their chips. Since then, it has been silent about the program.
Dina McKinney, a former executive at Advanced Micro Devices, has taken on a new role as president of Nvidia’s custom unit. According to her LinkedIn page, her team’s objective is to make Nvidia’s technology available to customers in the cloud, 5G wireless, video games, and automotive.
$30 Billion Market
Alan Weckel of research firm 650 Group projects that the data center custom chip market will reach a valuation of $10 billion this year and triple that amount by 2025.
The bespoke chip business as a whole was estimated by Needham analyst Charles Shi to be worth $30 billion in 2023, or around 5% of annual worldwide chip sales. Currently, bespoke silicon design for data centers is dominated by Broadcom and Marvell.
Generally, Taiwan Semiconductor Manufacturing Co. or another contract chip maker would handle the chip fabrication, packaging, and other procedures, while a design partner like Nvidia would provide intellectual property and technology.
Laptops 1000The entry of Nvidia into this market could reduce sales for Marvell and Broadcom. “This is a real threat, given that Marvell’s custom silicon business is only about $2 billion and Broadcom’s is approaching $10 billion,” stated Dylan Patel, the founder of SemiAnalysis, a silicon research organization. “It’s a real big negative – there’s more competition entering the fray.”
BEYOND AI
Nvidia is in talks with telecom infrastructure developer Ericsson to produce a wireless chip that incorporates the chip designer’s graphics processing unit (GPU) capabilities. Weckle of 650 Group projects that the telecom custom chip industry will be stable at between $4 billion and $5 billion annually.
Nvidia also intends to pursue the video gaming and automobile industries. Weckel projects a 20% annual growth rate in the custom auto business, which is currently valued at $6 billion to $8 billion. In addition, he believes that the next generation of Xbox and Sony video game consoles will boost the $7 billion to $8 billion custom chip market.
Nvidia’s Tegra X1 chip is already present in Nintendo’s existing portable Switch system. According to one insider, an Nvidia-exclusive design is probably going to be included in a new Switch console that is anticipated this year.
