NVIDIA is stepping up the development of custom chips for large customers, targeting the AI market
NVIDIA has announced the creation of a new division that will specialize in the development of customized chips for cloud service providers and other key customers. This move is part of the company’s strategy to dominate the market for specialized chips for artificial intelligence (AI) and ensure competitiveness in the face of an increasing number of alternative offerings. Thanks to the successful control of about 80% of the high-performance AI chip market, NVIDIA was able to increase its market value by 40%, reaching $1.73 trillion this year.
NVIDIA’s key customers, including OpenAI, Microsoft, Alphabet, and Meta, are actively purchasing H100 and A100 chips to support their generative AI developments. Greg Reichow of Eclipse Ventures points to the indispensability of these chips for optimizing power consumption and reducing costs, noting that Meta plans to purchase up to 350 thousand H100 units this year.
In response to the trend of developing its own processors by tech giants, NVIDIA has held talks with representatives of Amazon, Meta, Microsoft, Google, and OpenAI to create custom chips. The company also seeks to attract customers in the telecommunications, automotive, and video game sectors, expanding its market presence.
Analysts estimate that the market for specialized chips for data centers could reach $10 billion this year and double by 2025. Needham analyst Charles Shi estimates the volume of the custom chip market at about $30 billion a year, which is about 5% of global chip sales.
NVIDIA plans to compete with Broadcom and Marvell in the market of specialized AI chips and custom chips for data centers. According to sources, Dina McKinney, a former top executive at AMD and Marvell, will head a new NVIDIA unit that will expand the company’s presence in the cloud computing, 5G, video games, and automotive niches. After media inquiries, this information was removed from public sources, and NVIDIA declined to comment.
NVIDIA’s influence on the custom chip market could be significant for Broadcom and Marvell, as Broadcom’s business in this area is estimated at $10 billion, and Marvell’s is about $2 billion. Nintendo Switch already uses the NVIDIA Tegra X1 chip, and the new version of the console is expected to receive a custom processor from NVIDIA. The company is also in talks with Ericsson to develop the chip and plans to take positions in the automotive and video game markets. Telecommunications chip markets are estimated at $4-5 billion a year, and specialized chips for cars and video games have the potential for significant growth.
In a typical partnership agreement, NVIDIA provides its intellectual property and technology, while contract manufacturers, such as TSMC, are responsible for chip manufacturing, packaging, and other stages.
