Nvidia, the dominant force in AI chip design and supply, is charting a new course by establishing a dedicated business unit focused on crafting bespoke chips tailored for cloud computing firms and other clients, including cutting-edge artificial intelligence (AI) processors. According to nine sources familiar with the plans who spoke to Reuters, this move aims to tap into the burgeoning market for custom AI chips and safeguard Nvidia against increasing competition in the sector.
Based in Santa Clara, California, Nvidia currently commands approximately 80% of the high-end AI chip market, a position that has propelled its stock market value by 40% this year to a staggering $1.73 trillion, following a more than threefold surge in 2023.
The company's clientele, which includes industry giants like OpenAI, Microsoft, Alphabet, and Meta Platforms, has been in a frenzied rush to secure Nvidia's chips, particularly for applications in the rapidly expanding generative AI sector.
Nvidia's H100 and A100 chips have served as versatile, all-purpose AI processors for many of its major customers. However, these tech giants have begun developing their own internal chips tailored to specific needs, aiming to optimize energy consumption and potentially reduce costs and design time.
To remain relevant in this evolving landscape, Nvidia is now venturing into assisting these companies in the development of custom AI chips, a space that has seen increasing competition from rival firms like Broadcom and Marvell Technology, as per the sources.
Greg Reichow, general partner at venture capital firm Eclipse Ventures, highlighted the importance of customizing chips for specific applications, stating, "If you're really trying to optimize on things like power, or optimize on cost for your application, you can't afford to go drop an H100 or A100 in there."
While Nvidia has not disclosed the prices of its H100 chips, which are higher than the prior-generation A100, each chip can fetch anywhere from $16,000 to $100,000 depending on volume and other factors. Meta Platforms, for instance, plans to acquire a total of 350,000 H100s this year.
Nvidia officials have reportedly engaged in discussions with representatives from major tech firms like Amazon.com, Meta, Microsoft, Google, and OpenAI regarding the production of custom chips tailored to their specific needs, signaling the company's ambitions to expand its offerings beyond data center chips into areas like telecom, automotive, and video games.
The news of Nvidia's foray into custom chip manufacturing has stirred investor interest, with Nvidia shares rising by 2.75% following the Reuters report, while chip stocks overall experienced an uptick. Conversely, shares of Marvell dropped by 2.78%.
While Nvidia declined to comment on its plans beyond its 2022 announcement, it's evident that the company is making strategic moves to diversify its portfolio and maintain its competitive edge in an increasingly crowded market.
