Nvidia is choosing the competition as it plans to compete in the $30 billion custom chip market, but is this a sign that the AI giant has reached its peak?
Nvidia currently controls about 80% of the market for high-end AI chips, a position that has boosted its stock market value to $1.82 trillion. Technology giants such as OpenAI, Microsoft, Alphabet and Meta are in a race to secure their chips to compete in the rapidly emerging generative AI sector.
In an effort to reduce power consumption and potentially reduce design costs and time, some of Nvidia’s major customers have now begun developing their own internal chips for specific needs.
But according to ReutersNvidia plans to combat this potential threat to its business by entering the lucrative custom chip market.
In 2022, Nvidia announced it would let third-party customers integrate some of its own networking technology with their own chips. According to sources, Nvidia officials have now met with representatives of its largest technology customers to discuss creating custom chips for them.
Dina McKinney, a former AMD and Marvell executive, leads Nvidia’s custom unit, and beyond the data centers, her team’s goal is to make the technology available to customers in cloud, 5G wireless, video games and automotive.
According to estimates from research firm 650 Group, the market for custom chips for data centers will grow to as much as $10 billion this year, and double that by 2025. The broader market for custom chips was worth about $30 billion in 2023, which amounts to approximately $5 billion. % of annual global chip sales.
Broadcom and Marvell currently dominate custom silicon design for data centers. Nvidia’s entry into this area could potentially hurt their sales. Nvidia shares rose 2.75% after the Reuters report, while Marvell shares fell 2.78%.