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Nvidia targets $30B custom chip market with new unit – sources


February 9, 2024‍ – 4:45 AM PST

Nvidia’s Grace Hopper superchips are displayed at⁣ Gigabyte⁤ during COMPUTEX Taipei, one ⁣of the ​world’s largest computer and technology trade shows, in Taipei, Taiwan ‍May 30, 2023. REUTERS/Ann Wang/File Photo

SAN FRANCISCO (Reuters) – Nvidia (NVDA.O) is⁣ venturing into a⁤ new frontier by establishing a dedicated business unit that specializes ⁢in creating custom chips for‌ cloud computing ⁣companies and other clients, including⁢ cutting-edge artificial⁣ intelligence processors, according to nine ​sources familiar with the ‍company’s plans.

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As the dominant global leader in ⁣AI chip design and supply, Nvidia aims to seize a share of‍ the rapidly expanding market‌ for customized ​AI chips and safeguard itself against ‍the growing number of companies‍ seeking alternatives to its ‍products.

Based in Santa Clara, California, the company currently commands approximately ​80% of the high-end AI chip market, a position that has propelled its market value to $1.73 trillion, ⁣a 40% increase this year alone following a more than tripled⁤ growth in 2023.

Major customers such as OpenAI, Microsoft, Alphabet, and Meta Platforms have been scrambling to secure the limited supply of Nvidia‌ chips to compete in the rapidly emerging generative AI sector.

While Nvidia’s H100 and A100 chips serve as versatile, all-purpose AI processors for these customers, tech companies have begun developing their⁣ own specialized chips to optimize energy consumption and reduce design costs and time.

Now, Nvidia⁢ is stepping in to assist these companies in ⁣creating ⁢custom AI chips, a market that has been dominated by rival firms like Broadcom and Marvell Technology, according to ​anonymous sources familiar with the​ matter.

“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,” said​ Greg Reichow, general partner at venture capital firm Eclipse Ventures. “You want to have ‌the exact right mixture of ​compute and just‍ the kind of ​compute that you need.”

Nvidia has been in discussions with​ Amazon.com, Meta, Microsoft, Google,​ and OpenAI‍ to explore‍ the possibility of creating custom chips for them, according to insiders. In addition to data center chips, the company has also been pursuing opportunities ​in the telecom, automotive, and video game sectors.

In 2022, Nvidia announced a program that allows third-party customers to integrate its proprietary networking⁣ technology with⁣ their own chips. However, the company has ⁤remained silent about its broader ambitions until now.

Dina McKinney, a former executive at Advanced Micro Devices and Marvell, leads Nvidia’s custom unit, which aims‍ to make its‍ technology accessible to customers in the cloud, 5G wireless, video game, and automotive industries, according to her LinkedIn profile. After Reuters sought comment from ​Nvidia,⁤ references to these industries were ‌removed from her profile and her title was changed.

While Amazon, Google, Microsoft, Meta, and OpenAI declined to comment, research ​firm 650 Group estimates that the data center custom chip market will reach⁤ $10 billion this year and double that by 2025.‌ The broader custom chip market ⁤was⁣ valued at approximately $30 billion‌ in 2023, accounting for around 5% of global ‌chip sales.

Currently, Broadcom and Marvell dominate the custom‌ silicon‌ design for data‌ centers. However, Nvidia’s entry into this space poses a significant threat‍ to‍ their sales.

“With Broadcom’s custom silicon business touching $10 billion, and Marvell’s ⁤around⁤ $2 billion, this is a⁢ real threat,” said Dylan Patel, founder of the silicon research group SemiAnalysis. “It’s a real big negative –⁤ there’s more‌ competition entering ⁣the ⁢fray.”

In addition to AI, Nvidia is also ⁣exploring opportunities in other sectors.⁤ The company is reportedly in talks with telecom infrastructure builder Ericsson ​for a wireless chip that incorporates Nvidia’s graphics processing unit (GPU) technology. The telecom custom chip market‌ is ⁢expected to remain steady​ at around $4 ⁢billion to $5 billion per year.

Nvidia also ​has plans to target the automotive and video game markets. Research firm 650 Group predicts that the custom auto market will experience ⁣consistent growth at a rate of 20% per year, while the video game custom chip⁣ market, currently valued at $7 billion to $8 ⁣billion, could​ see an increase⁣ with the release of next-generation consoles ‌from Xbox and Sony.‍ Nintendo’s ⁣upcoming version of⁣ the Switch ⁣handheld console is also expected to feature a custom Nvidia⁤ design.

Apple is building prototypes of foldable iPhones, and Pinterest’s recent drop in stock value suggests that smaller social media platforms may be losing ground ‍to larger players ⁣in‍ the battle for ad dollars. ‌Meanwhile, ⁢Google is offering consumers the option to pay for enhanced reasoning capabilities⁢ as it competes‌ with Microsoft for subscriptions.

Reporting by Max Cherney and Stephen Nellis ⁣in San Francisco; Additional reporting by Supantha Mukherjee in ‌Stockholm and Krystal Hu in San Francisco; ⁤Editing by Kenneth Li, Peter Henderson, ⁤and Jamie Freed

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What are the potential opportunities for Nvidia in​ sectors like telecom, automotive,⁣ and⁤ video games as it expands into the custom chip market

‌Nvidia Ventures into Custom Chip Market‌ for Cloud Computing and AI

February⁢ 9, 2024‍ – 4:45 AM PST

Nvidia (NVDA.O) is entering a new ⁤sector by establishing a dedicated business unit ‌that focuses on creating custom chips for ⁢cloud computing companies and other​ clients,‍ including advanced artificial intelligence processors, according to anonymous sources familiar with the company’s plans.

As the global leader⁤ in AI chip design and supply, Nvidia aims to capture a portion of the rapidly expanding market for customized AI chips and protect itself against the growing number of companies looking for ‌alternatives to‍ its products.

Headquartered in Santa⁤ Clara, ‌California, Nvidia currently holds approximately⁢ 80% of ‌the high-end AI chip market. This dominant position has propelled its market value to $1.73 trillion, a 40%​ increase this year alone following a significant‌ growth in 2023.

Major​ customers such as OpenAI, Microsoft,⁤ Alphabet, and Meta Platforms ⁣have ‌been competing ‌to secure the limited supply​ of Nvidia chips in the emerging generative AI⁢ sector.

While Nvidia’s H100 and A100 chips serve as versatile, all-purpose AI processors for these customers, tech companies have begun developing‍ their own specialized chips to optimize energy consumption and⁢ reduce design costs and time.

Now, Nvidia is stepping in to ‍assist these companies in creating custom AI chips, a market that has been dominated by rival firms‍ like Broadcom and Marvell Technology.

Nvidia has been in discussions ‍with Amazon.com, Meta, Microsoft, Google, and OpenAI to​ explore the possibility of⁢ developing custom chips for them. The company is also looking into opportunities⁤ in the telecom, automotive, and​ video game sectors.

In‍ 2022, Nvidia ⁢announced a program that⁢ allows third-party customers to integrate its proprietary networking technology with their⁢ own chips. However, the company has remained silent ⁤about its broader ambitions until now.

Dina McKinney, a former executive at Advanced Micro Devices and Marvell, leads Nvidia’s custom unit. Her LinkedIn profile​ indicated that the unit aims to ⁤make ⁢Nvidia’s technology accessible to customers in the cloud, 5G⁢ wireless, video game, and automotive ⁣industries. However, after Reuters sought comment from Nvidia, ​references to these industries were removed from her profile and her title​ was changed.

While Amazon, Google, Microsoft, Meta, and⁣ OpenAI declined to comment on the matter, research⁤ firm 650 Group estimates that the ⁣data center custom chip ⁢market will reach $10 billion this year and double⁢ that by 2025. The broader custom chip market was⁣ valued at​ approximately $30 billion in 2023, accounting for around 5% of global chip sales.

Currently, ⁣Broadcom and Marvell dominate the custom silicon design for data centers. However, Nvidia’s entry into ​this‌ space poses a significant threat to their sales.

Nvidia is not only focusing on AI but is also exploring opportunities in‌ other sectors. The company ⁣is reportedly in talks with telecom infrastructure​ builder Ericsson for a wireless ⁢chip incorporating Nvidia’s graphics processing unit (GPU) technology. The telecom custom chip market is expected to remain ⁤steady at around $4 billion to ⁤$5​ billion per year.

Nvidia also has plans to target‍ the ⁢automotive⁢ and ‍video game markets. Research firm⁤ 650 Group predicts ⁤that the ⁢custom auto ⁣market will experience consistent growth at​ a rate of 20% per year, while the video game custom chip market, currently valued at $7 billion to $8 ​billion, may see an increase with the release of next-generation consoles from Xbox and Sony. Nintendo’s upcoming ⁢version of the Switch handheld ‌console is also expected to feature a custom Nvidia design.

In conclusion, Nvidia’s decision to venture into the custom chip market for ‍cloud⁢ computing and AI is aimed at capitalizing on ⁢the growing⁣ demand for customized AI chips and ensuring its continued dominance in the industry. The company’s entry into this space poses a significant threat to established players and opens up new opportunities ⁤in various sectors. All eyes are now on Nvidia as it navigates this new frontier and seeks to expand its market share further.



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