Nvidia (NVDA) is reportedly aiming to establish a fresh business division dedicated to developing tailor-made AI chips, as stated by Reuters. In this report, Yahoo Finance Tech Editor Dan Howley elaborates on the specifics and highlights the extensive prospects that this venture could offer for Nvidia. To gain further expertise and stay updated on the current market trends, you can watch the complete episode of Yahoo Finance Live by clicking here.
Video Transcript
SEANA SMITH: Alright. It appears that NVIDIA is aiming to tap into a growing market for customized AI chips through the establishment of a new business unit. Our correspondent, Dan Howley, is here to provide us with more information. Dan, we observe that the stock is experiencing a slight increase of approximately 2%.
DAN HOWLEY: Indeed, Seana. In fact, it is approaching the market value of Amazon and has surpassed the $1 trillion milestone. This news comes from an exclusive report by Reuters. Essentially, they have gathered insights from various sources indicating that Nvidia is venturing into the realm of custom chip development. Now, let me delve into the specifics of what this entails.
Nvidia presently offers its H100, a top-tier chip, to prominent cloud and AI companies, among others.
One can liken it to a Lamborghini in terms of its pricing and capabilities. Similar to the luxury car, the H100 is designed to be a powerful and efficient machine, capable of handling numerous processes simultaneously. This is where the true value of a GPU lies.
The issue lies in the fact that, similar to a Lamborghini, it consumes a significant amount of energy. Consequently, numerous companies such as Microsoft, Amazon, Meta, and Alphabet are developing their own customized chips known as ASICs. These chips are specifically designed to cater to particular requirements. While Nvidia offers larger chips that serve as a general solution for GPUs and AI, ASICs fulfill unique needs for companies like Microsoft and Meta.
These companies are increasingly adopting ASICs and incorporating them into their operations. This development raises concerns for Nvidia, as it may eventually impact their market share and overall potential market. After all, if a company can create chips tailored to their specific needs, why would they need to purchase the Lamborghinis that Nvidia provides?
By 2024, Nvidia, a technology company, has plans to establish a semiconductor hub in Vietnam. During his visit to the country, Jensen Huang, the CEO of Nvidia, shared this exciting news, highlighting the company’s aspiration to strengthen partnerships with leading Vietnamese companies such as Viettel, FPT, Vingroup, and VNG. The ultimate goal is to enhance Vietnam’s intelligence capabilities and improve its infrastructure.
Nvidia appears to be actively collaborating with these companies, asserting their capability to not only match their efforts but surpass them. This confidence stems from their prior accomplishments in the Lamborghini sector, which positions them favorably. Consequently, Nvidia aims to offer more adaptable chips, which is a significant advantage considering the energy efficiency they possess.
Considering the substantial energy consumption associated with these applications and chips, the introduction of more customized options that consume less energy is noteworthy. These tailored chips cater specifically to the requirements of these companies. As a result, Nvidia has the potential to overshadow these companies’ internal projects and establish themselves as the frontrunner in this domain. However, it is important to note that this does not imply that Nvidia is currently facing any imminent threats.
The massive super cloud providers, such as Microsoft, Amazon, and Meta, are the only companies currently producing these custom chips. However, there are still numerous companies worldwide that are vying for access to Nvidia’s larger chips and will continue to sell them. These companies are taking a proactive approach and trying to stay ahead by focusing on the development of more specialized chips. Thank you, Howley, for providing this insightful breakdown. The investor excitement surrounding Nvidia stock has been evident, as the shares continue to rise. Thank you, Dan.