Nvidia Leads AI Chip Race, Faces Rising Rivals

Key Takeaway

• Nvidia dominates the AI chip market with over 90% share, but faces growing competition from AMD, Intel, and cloud giants.
• Nvidia's H100 GPU launch tripled its share price; its latest Blackwell B200 GPU sets a new performance benchmark.
• Beyond chipmakers, companies like Eaton and Super Micro Computer are thriving by supporting the AI infrastructure boom.

AI Revolution Fuels Nvidia's Surge

Nvidia, once primarily known for its PC graphics cards, has become a central player in the artificial intelligence (AI) revolution. Its graphics processing units (GPUs) are now pivotal in creating large language models and running inference software in data centers globally. With over 90% market share, Nvidia stands nearly unchallenged in this domain. However, the landscape is shifting as new competitors, ranging from established chipmakers to cloud computing vendors and venture-backed startups, enter the fray. The AI chip market, as estimated by AMD's CEO Lisa Su, could reach $400 billion by 2027, with Intel's CEO Pat Gelsinger projecting a $1 trillion opportunity by 2030.

Nvidia's H100 GPU, launched in March 2022, significantly impacted the financial markets, tripling Nvidia's share price and boosting its market value to $2.1 trillion. The company's fiscal fourth-quarter revenue soared to $22.1 billion, a 265% increase from the previous year, with data center revenue up 409%. Nvidia's latest release, the Blackwell B200 GPU, is said to outperform the H100, setting a high bar for competitors.

Competition Heats Up

Nvidia faces competition from several fronts. Advanced Micro Devices (AMD) and Intel are its most direct challengers. AMD's shares have rallied 71% over the past 12 months, buoyed by the market's perception that its new MI300 GPUs could challenge Nvidia's dominance. Intel, though coming from behind, has introduced its third-generation AI accelerator chips, Gaudi 3, claiming superior performance and efficiency compared to Nvidia's offerings. Qualcomm is focusing on AI inference chips for edge devices, suggesting a shift in inference workloads from the cloud to the edge.

Cloud-computing giants like Amazon, Alphabet, Meta Platforms, and Microsoft are also developing their AI chips, aiming to control more of their technology stack. This internal competition, coupled with venture-backed startups like Cerebras Systems and Groq, indicates a vibrant and evolving AI chip market.

Beyond Chipmakers: Diversifying AI Investments

Ocean Park Investments, under Chief Investment Officer J. Dennis Jean-Jacques, has identified value opportunities beyond direct chipmakers. Companies like Eaton, Vertiv, and Super Micro Computer are capitalizing on the AI boom without competing directly with Nvidia or AMD. Eaton, focusing on electrification essential for AI and data centers, has seen its stock price nearly double in the past 12 months. Vertiv, specializing in infrastructure and cooling technology, has surged over 560% in the same period. Super Micro Computer, benefiting from its close relationship with Nvidia, has seen a staggering 717% increase.

Street Views

• Andrew Dieckmann, AMD (Bullish on AMD's position in the AI chip market):

  "AMD is really the only other company on the field... We’re the only other solution being adopted at scale within the industry."

• Jeni Barovian, Intel (Cautiously Optimistic about Intel's potential in AI chips):

  "Customers want alternatives... They don’t feel like they’re getting a choice today."

• Ziad Asghar, Qualcomm (Neutral to Bullish on inference workloads moving to edge devices):

  "The center of gravity in inference is shifting from the cloud to the edge."

Management Quotes

• Lisa Su, CEO of Advanced Micro Devices:

  "Sized the AI chip market at $400 billion by 2027."

• Pat Gelsinger, CEO of Intel:

  "Projected a $1 trillion opportunity by 2030."

• Jensen Huang, CEO of Nvidia:

  "We have more competition than anyone on the planet... even when competitors' chips are free, it’s not cheap enough."