Nvidia, holding a commanding 80% share of the high-end AI chip market, is forging ahead with plans to establish a specialized business unit. This division will focus on crafting tailor-made chips for cloud computing entities and other enterprises, particularly those in the realm of advanced artificial intelligence (AI) processing. The move is aimed at seizing a slice of the burgeoning market for custom AI chips while safeguarding against rising competition. Nvidia’s stock market value has surged by 40% this year to reach $1.73 trillion, following a remarkable tripling in value during 2023.
Nvidia’s clientele, including prominent names like OpenAI, Microsoft, Alphabet, and Meta Platforms, have been rapidly acquiring its chips to gain an edge in the dynamic generative AI sector. While Nvidia’s H100 and A100 chips serve as versatile AI processors for many of these clients, there’s a growing trend among tech giants to develop their own specialized chips to enhance efficiency and cut down costs. To address this evolving landscape, Nvidia aims to assist these companies in creating custom AI chips tailored to their specific requirements.
The company has already engaged in discussions with industry heavyweights such as Amazon.com, Meta, Microsoft, Google, and OpenAI regarding the potential development of custom chips. This expansion beyond data center chips aligns with Nvidia’s broader strategy, which also encompasses telecom, automotive, and gaming sectors. As a result of this forward-looking initiative, Nvidia’s stock saw a 2.75% increase following the Reuters report, while chip stocks overall experienced an uptick.
Nvidia’s move into custom chip design is part of a larger trend in the industry. The data center custom chip market, as estimated by research firm 650 Group’s Alan Weckel, is projected to reach $10 billion in 2025. Moreover, the broader custom chip market was valued at approximately $30 billion in 2023, constituting around 5% of the global chip sales for that year. Currently, Broadcom and Marvell dominate the custom silicon design landscape for data centers, but Nvidia aims to challenge their supremacy with its innovative approach.