Nvidia’s Big Tech Rivals Bring Their Own AI Chips to the Table: Report
Illustration: Binay Sinha
By Cade Metz, Karen Weise and Mike Isaac
In September, Amazon said it would invest up to $4 billion in Anthropic, a San Francisco startup focused on artificial intelligence (AI).
Shortly afterwards, an Amazon manager sent a private message to a manager at another company. He said Anthropic won the deal because it agreed to build its AI using specialized computer chips designed by Amazon.
Amazon, he wrote, wanted to create a viable competitor to chipmaker Nvidia, a key partner and kingmaker in the all-important field of AI.
The boom in generative AI over the past year has highlighted just how dependent major tech companies have become on Nvidia. They can’t build chatbots and other AI systems without a special kind of chip that Nvidia has mastered in recent years. They’ve spent billions of dollars on Nvidia’s systems, and the chipmaker hasn’t kept up with demand. So Amazon and other industry giants – including Google, Meta and Microsoft – are building their own AI chips. With these chips, the technology giants could determine their own destiny. They could reduce costs, eliminate chip shortages, and ultimately sell access to their chips to companies that use their cloud services.
While Nvidia sold 2.5 million chips last year, Google spent between $2 billion and $3 billion building about a million of its own AI chips, said Pierre Ferragu, an analyst at New Street Research. Amazon spent $200 million on 100,000 chips last year, he estimates. Microsoft said it had started testing its first AI chip.
But this work is a balancing act between competing with Nvidia while working closely with the chipmaker and its increasingly powerful CEO, Jensen Huang.
According to research firm Omdia, Huang’s company accounts for more than 70 percent of sales of AI chips. It powers an even greater percentage of the systems used in creating generative AI. Nvidia’s revenue has increased 206 percent in the past year and the company has added about a trillion dollars in market value.
What revenues are for Nvidia are costs for the tech giants. Orders from Microsoft and Meta represented about a quarter of Nvidia’s revenue over the past two full quarters, said Gil Luria, an analyst at investment bank DA Davidson. Nvidia sells its chips for about $15,000 each, while Google spends an average of just $2,000. up to $3,000 each, according to Ferragu. “When they encountered a vendor holding them over a barrel, they reacted very violently,” Luria said. Companies are constantly courting Huang, trying to get to the front of the line for his chips. He regularly appears on event stages with their CEOs, and the companies are quick to say they remain committed to their partnership with Nvidia. They all plan to continue offering their chips alongside their own.
According to research firm Gartner, the AI chip market is expected to more than double to approximately $140 billion by 2027.
The Pentagon is planning an AI program to estimate critical mineral prices
The U.S. Department of Defense plans to develop a program to estimate prices and forecast supplies of nickel, cobalt and other crucial minerals.
The program, which received little attention after its announcement, is part of Washington’s broader efforts to boost U.S. production of crucial minerals used in weapons production and the energy transition. U.S. production lags behind market leader China, in part because efforts to build new U.S. mines can be heavily affected by fluctuations in commodity prices. For example, Jervois Global announced last year that it would suspend construction of a cobalt project in Idaho, partly due to low market prices, while Chinese cobalt miners – financially backed by Beijing – said they would ramp up production of the battery metal in a bid for greater market share .
First print: January 30, 2024 | 12:45 pm IST