Nvidia is aiming to grasp a portion of a booming market for specialized AI and cloud computing chips and protect itself from companies pursuing other options
Nvidia Corp is constructing a new business unit concentrated on creating tailor-made chips for cloud computing firms and others, including cutting-edge artificial intelligence (AI) processors, nine sources familiar with its plans told Reuters.
The dominant global designer and supplier of AI chips aims to secure a percentage of an exploding market for specific AI chips and guard itself from the expanding number of companies pursuing alternatives to its products.
The Santa Clara, California-based company controls about 80 percent of the high-end AI chip market, a position that has sent its stock market value up 40 percent so far this year to US$1.73 trillion after it more than tripled last year.
Nvidia’s clients, which include ChatGPT creator OpenAI, Microsoft Corp, Alphabet Inc and Meta Platforms Inc, have raced to snatch up the diminishing supply of its chips to compete in the fast-emerging generative AI sector.
The firm’s H100 and A100 chips function as a generalized, all-purpose AI processor for many of those major clients, but the tech companies have begun to develop their own internal chips for specific needs, a move that helps reduce energy consumption and, potentially, the cost and time to design.
Nvidia is currently striving to play a role in assisting these companies in the development of custom AI chips that have been flowing to adversary firms such as Broadcom Inc and Marvell Technology Group Inc, the sources said.
“If you’re truly 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,” Eclipse Ventures LLC general partner Greg Reichow said in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”
Nvidia does not disclose H100 prices, which are higher than for the prior-generation A100, but each chip can sell for US$16,000 to US$100,000 depending on volume and other factors. Meta plans to bring its total stock to 350,000 H100s this year.
Nvidia officials have met with representatives from Amazon.com, Meta, Microsoft, Google and OpenAI to discuss creating custom chips for them, two sources familiar with the meetings said. Beyond data center chips, Nvidia has pursued telecom, automotive and video game customers.
Dina McKinney, a former Advanced Micro Devices Inc and Marvell executive, heads Nvidia’s custom unit and her team’s goal is to make its technology available for customers in cloud, 5G wireless, video games and automotives, a LinkedIn profile said. Those mentions were scrubbed and her title changed after Reuters sought comment from Nvidia.
According to estimates from research firm 650 Group’s Alan Weckel, the data center custom chip market will grow to as much as US$10 billion this year, and double that next year.
The broader custom chip market was worth roughly US$30 billion last year, which amounts to roughly 5 percent of annual global chip sales, according to Needham & Co analyst Charles Shi.
Currently, custom silicon design for data centers is dominated by Broadcom and Marvell.
In a typical arrangement, a design partner such as Nvidia would offer intellectual property and technology, but leave the chip fabrication, packaging and additional steps to Taiwan Semiconductor Manufacturing Co (台積電) or another contract chip manufacturer.
Nvidia moving into this territory has the potential to eat into Broadcom and Marvell sales.
“With Broadcom’s custom silicon business touching US$10 billion, and Marvell’s around US$2 billion, this is a real threat,” SemiAnalysis founder Dylan Patel said. “It’s a real big negative — there’s more competition entering the fray.”
Nvidia is in talks with telecom infrastructure builder Ericsson AB for a wireless chip that includes the chip designer’s graphics processing unit technology, two sources familiar with the discussions said.
Weckle expects the telecom custom chip market to remain flat at roughly US$4 billion to US$5 billion a year.
Nvidia also plans to target the automotive and video game markets, according to sources and public social media postings.
Weckel expects the custom auto market to grow consistently from its current US$6 billion to US$8 billion range at 20 percent a year, and the US$7 billion to US$8 billion video game custom chip market could increase with the next-generation consoles from Microsoft and Sony Group Corp.
Nintendo Co’s current Switch handheld console already includes Nvidia’s Tegra X1 chip. A new version of the Switch console expected this year is likely to include a Nvidia custom design, one source said.
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