Nvidia Pursues $30 Billion Custom Chip Opportunity
Nvidia’s New Business Unit
Nvidia is venturing into the creation of a new business unit focused on designing custom chips for cloud computing firms and other entities seeking advanced artificial intelligence (AI) processors. With plans to capture a portion of the burgeoning market for custom AI chips, the company aims to safeguard its position in the face of increasing competition.
Dominance in AI Chip Market
The Santa Clara-based company currently holds about 80% of the high-end AI chip market. This dominance has led to a significant increase in its stock market value and a surging demand for its products from major customers such as OpenAI, Microsoft, Alphabet, and Meta Platforms.
Shift Towards Custom Chips
While Nvidia’s H100 and A100 chips serve as generalized AI processors, major tech companies are now developing their own internal chips to cater to specific needs, aiming to reduce energy consumption and design costs. Nvidia is now looking to assist these companies in developing custom AI chips that can compete with offerings from rival firms such as Broadcom and Marvell Technology.
Targeting Major Customers
Nvidia officials have engaged in discussions with representatives from Amazon, Meta, Microsoft, Google, and OpenAI to explore the possibility of creating custom chips for their specific requirements. Beyond data center chips, Nvidia is also eyeing opportunities in the telecom, automotive, and video game sectors.
Market Potential and Competition
The data center custom chip market is projected to grow to $10 billion this year and double that figure by 2025. The broader custom chip market was worth roughly $30 billion in 2023, accounting for about 5% of annual global chip sales. With Nvidia’s entry into this territory, it poses a potential threat to the sales of dominant players like Broadcom and Marvell.
Expanding into Other Sectors
Besides the data center, Nvidia is also in talks with Ericsson for a wireless chip that incorporates the company’s GPU technology. The company also has plans to target the automotive and video game markets, with expectations of consistent growth in these sectors.
Nvidia’s move into custom chip design signifies a significant shift in the industry landscape and presents both opportunities and challenges for the company and its competitors.
