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Business News/ Technology / Nvidia’s Rivals Prepare Their AI Assault
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Nvidia’s Rivals Prepare Their AI Assault

wsj

AMD and Intel are pushing new AI chips into the market, but Nvidia’s dominance will be hard to crack.

AMD CEO Lisa Su has told investors that the company expects $2 billion in revenue from its new AI chips next year. Premium
AMD CEO Lisa Su has told investors that the company expects $2 billion in revenue from its new AI chips next year.

Nvidia was never going to have the artificial intelligence market all to itself.

The past year has certainly made it seem that way, though. Nvidia’s sales have more than doubled—and its market value more than tripled—as major tech companies snapped up the company’s chips to capitalize on the explosive interest in generative AI sparked by the launch of the ChatGPT online chatbot a year ago. Intel and Advanced Micro Devices, two of Nvidia’s largest competitors, have seen their data-center sales shrink lately as the tech giants operating those networks have redirected their spending toward Nvidia’s specialized chip platforms.

That is a situation that both chip makers need to remedy, and quickly. Intel and AMD still draw a lot of their business from the mature and slow-growing market of personal computers. That places a greater onus on their data-center segments to drive overall revenue growth. AMD has been highly successful in this pivot over the past few years as technological leaps and a smart partnership with chip-making powerhouse Taiwan Semiconductor Manufacturing allowed it to take share from Intel in the market for central processing chips, or CPUs, used in data centers. AMD’s data-center sales jumped 64% last year while Intel’s slid by 15%.

But even AMD has felt the pinch of wallet share moving to Nvidia; the chipmaker’s data-center revenue for the past two quarters is down 6% from a year earlier. Hence, much is riding on a new class of AI accelerator chips called the MI300 family that the company is launching this quarter. AMD is holding an event Wednesday to spotlight those and other AI-related products just a few miles from Nvidia’s own headquarters. The company also has taken the unusual step of projecting revenue for a specific product line; Chief Executive Officer Lisa Su told investors during the company’s third-quarter call last month that the company expects $2 billion in revenue from the new AI chips next year.

Such a boost from a brand-new product would be a major score for AMD, which was projected by Wall Street to do about $10 billion in data-center sales for 2024 before that forecast. But it also wouldn’t make much of a dent for Nvidia, which is projected to do more than $76 billion in data-center revenue for the same period and nearly $90 billion the following year.

“It’s literally a rounding error," said Bernstein analyst Stacy Rasgon, comparing the two companies’ projected sales.

Intel really can’t afford to miss the AI party either. The chip-making pioneer is in the midst of an ambitious and expensive turnaround plan to regain its manufacturing edge while also improving both its PC and data-center businesses. Both have been under pressure because of industry shifts and competition. Intel’s revenue has fallen for the past two years in a row, adjusting for the sale of its memory business in 2021, and is expected to decline again this year. That would be the first time since at least 1990 that Intel has seen revenue fall three years in a row, according to data from S&P Global Market Intelligence.

Intel is holding an event in New York City on Dec. 14 to showcase some of its latest AI products. Those will include chips designed to enable generative AI to run directly on PCs, a feature expected to figure prominently in new computers and smartphones launching next year. Wall Street seems hopeful; analysts expect Intel’s PC and data-center segments to show double-digit revenue gains in 2024, according to FactSet estimates.

That would still leave Intel lagging Nvidia, which is expected to surpass the historically much larger Intel in total revenue this year and close its fiscal year ending in January of 2025 with revenue of $91 billion—15% more than Intel’s all-time annual record.

But Nvidia’s dominance still leaves room for competitors. Tech giants snapping up AI processors are loath to rely on a single supplier for such key technology. Chris Caso of Wolfe Research also notes that some tasks such as AI inferencing offer a “more level playing field" for challengers. “Training is where Nvidia has built such a big competitive moat," he said. Rival chip makers will still have their work cut out for them crossing it.

Write to Dan Gallagher at dan.gallagher@wsj.com

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