This is not investment advice. The author has no position in any of the stocks mentioned.
The Evolving AI Chip Landscape: A Challenge to NVIDIA’s Dominance
NVIDIA has long dominated the AI chip market, particularly in graphics processing units (GPUs). However, recent developments are suggesting the emergence of significant competitors that may disrupt NVIDIA’s extensive control over this vital sector.
OMDIA: $GOOGL‘S TPU DEMAND GROWS, CHALLENGING $NVDA‘S AI CHIP DOMINANCE
Omdia research shows surging demand for Google’s TPU chips, with estimates suggesting they could account for $6B–$9B in Broadcom’s AI semiconductor revenue this year. At even $6B, TPU shipments are growing…
— Wall St Engine (@wallstengine) December 18, 2024
Rising Demand for Google’s TPUs
According to Omdia Research, Google’s Tensor Processing Units (TPUs) are projected to generate between $6 billion and $9 billion in AI-related sales for Broadcom this year. This marks a notable shift in the dynamics shaping the AI chip market.
To provide additional context, Broadcom is currently developing custom AI chips, known as ASICs, for industry giants including Google, Meta, and ByteDance. Furthermore, the company is also working on next-generation AIXPUs in collaboration with two other clients.
Custom Chips Gaining Favor Among Cloud Providers
Many cloud providers are increasingly selecting custom chips over NVIDIA’s GPUs. This trend is driven by the inherent cost-effectiveness of ASICs, which allow for tailored optimization of internal workloads, making them a more attractive option for these companies.
Financial analysts from Morgan Stanley predict that the custom AI chip market will soar from approximately $120 billion in 2024 to $300 billion by 2027, effectively outpacing the GPU market’s growth rate.
Impact on NVIDIA’s Market Share
Omdia suggests that even at the lower end of Broadcom’s TPU shipment estimates for 2024, which stands at $6 billion, the impact on NVIDIA’s market share could be substantial.
Looking forward, Omdia remains optimistic about the potential for TPU-powered AI products to stimulate significant growth within Google Cloud.
$NVDA +2.75% [Microsoft bought twice as many of Nvidia’s flagship chips as any of its largest rivals in the U.S. and China this year, per FT.
Analysts at Omdia, a technology consultancy, estimate that $MSFT bought 485K of Nvidia’s “Hopper” chips this year. That put Microsoft far…
— NOTRELOAD AI (@thudderwicks) December 18, 2024
NVIDIA’s Continued Stronghold
Despite these emerging challenges, NVIDIA is not expected to relinquish its dominance in the near future. Reports indicate that Microsoft purchased an impressive 485,000 units of NVIDIA’s Hopper GPUs this year, while Meta acquired an additional 224,000 units of this previous-generation technology. Additionally, NVIDIA is preparing to launch its next-generation Blackwell GPUs aimed at superseding the older Hopper chips.
Citi on $NVDA (Buy; PT $175): ‘Recent custom ASIC chipmakers’ $MRVL and $AVGO strong results are stirring up new investor questions on the old ‘GPU vs Custom ASIC’ debate.
As highlighted in our recent report, we expect both to coexist with the software reprogrammability to…
— Wall St Engine (@wallstengine) December 18, 2024
The Future of AI Chip Market
Citi projects that the total addressable market (TAM) for AI chips could reach $380 billion by 2028, with NVIDIA expected to maintain a dominant share of 75%, while custom ASICs will capture the remaining 25%.
Related Articles:
Martin Shkreli Suggests Shorting Bitcoin, MicroStrategy, and Quantum Computing Stocks
12:04
SpaceX Obtains FAA License for Starship Flight 7 “Well Ahead” of Scheduled Launch
23:06
SpaceX Experiences Ground Control Power Loss for One Hour During Historic Crew Launch in September – Report
22:42
Leave a Reply