Nvidia targets $30B custom chip market with new unit – sources
February 9, 2024 – 4:45 AM PST
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.
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.
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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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