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Exclusive-Nvidia chases $30 billion custom chip market with new unit -sources

2024.02.09 07:45

© Reuters. FILE PHOTO: Nvidia’s Grace Hopper superchips are displayed at Gigabyte throughout COMPUTEX Taipei, one of many world’s largest pc and expertise commerce reveals, in Taipei, Taiwan May 30, 2023. REUTERS/Ann Wang/File Photo

By Max A. Cherney and Stephen Nellis

SAN FRANCISCO (Reuters) – Nvidia (NASDAQ:) is constructing a new enterprise unit targeted on designing bespoke chips for cloud computing companies and others, together with superior synthetic intelligence processors, based on 9 sources acquainted with the corporate’s plans.

The dominant world designer and provider of AI chips goals to seize a portion of an exploding market for custom AI chips and to guard itself from the rising variety of corporations focused on discovering alternate options to its merchandise.

The Santa Clara, California-based firm at the moment controls about 80% of the market for high-end AI chips, a place that has despatched its market worth up 40% to this point this 12 months to $1.73 trillion after it greater than tripled in 2023.

Its prospects, which embrace ChatGPT creator OpenAI, Microsoft (NASDAQ:), Alphabet (NASDAQ:) and Meta Platforms (NASDAQ:), have raced to snap up the dwindling provide of Nvidia chips to compete within the quickly rising generative AI sector.

Nvidia’s H100 and A100 chips function a generalized, all-purpose AI processor for a lot of of these main prospects. But the tech corporations have began to develop their very own inner chips for particular wants. Doing so helps scale back power consumption, and probably can shrink the price and time to design.

Nvidia is now trying to play a task in serving to these corporations develop custom AI chips which have flowed to rival companies similar to Broadcom (NASDAQ:) and Marvell (NASDAQ:) Technology, based on the sources who declined to be recognized as a result of they weren’t licensed to talk publicly.

“If you’re really trying to optimize on things like power, or optimize on cost for your application, you can’t afford to go drop an H100 or A100 in there,” Greg Reichow, common accomplice at enterprise capital agency Eclipse Ventures stated in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”

   Nvidia doesn’t disclose H100 costs, that are larger than for the prior-generation A100, however every chip can promote from $16,000 to $100,000 relying on the quantity bought and different elements. Meta has stated it plans to convey its whole inventory to 350,000 H100s this 12 months.

Nvidia officers have met with representatives from (NASDAQ:), Meta, Microsoft, Google and OpenAI to debate making custom chips for them, based on two sources acquainted with the conferences. Beyond knowledge heart chips, the corporate has pursued telecom, automotive and online game prospects.

In 2022, Nvidia stated it could let third-party prospects combine a few of its proprietary networking expertise with their very own chips. The firm has stated nothing about this system since, and Reuters is reporting its wider ambitions for the primary time.

A Nvidia spokesperson declined to remark past the corporate’s 2022 announcement.

Dina McKinney, a former Advanced Micro Devices (NASDAQ:) and Marvell govt, heads Nvidia’s custom unit and her staff’s purpose is to make its expertise accessible for purchasers in cloud, 5G wi-fi, video video games and automotives, based on a LinkedIn profile. Those mentions have been scrubbed and her title was modified after Reuters sought remark from Nvidia.

Amazon, Google, Microsoft, Meta and OpenAI declined to remark.


According to estimates from analysis agency 650 Group’s Alan Weckel, the information heart custom chip market will develop to as a lot as $10 billion this 12 months, and double that in 2025.

The broader custom chip market was value roughly $30 billion in 2023, which quantities to roughly 5% of annual world chip gross sales, based on Needham analyst Charles Shi.

Currently, custom silicon design for knowledge facilities is dominated by Broadcom and Marvell.

In a typical association, a design accomplice similar to Nvidia would provide mental property and expertise, however depart the chip fabrication, packaging and extra steps to Taiwan Semiconductor Manufacturing Co. or one other contract chip producer.

Nvidia transferring into this territory has the potential to eat into Broadcom and Marvell gross sales.

“With Broadcom’s custom silicon business touching $10 billion, and Marvell’s around $2 billion, this is a real threat,” stated Dylan Patel, founding father of the silicon analysis group SemiAnalysis. “It’s a real big negative – there’s more competition entering the fray.”


Nvidia is in talks with telecom infrastructure builder Ericsson (BS:) for a wi-fi chip that features the chip designer’s graphics processing unit (GPU) expertise, based on two sources acquainted with the talks.

650 Group’s Weckle expects the telecom custom chip market to stay flat at roughly $4 billion to $5 billion a 12 months.

Ericsson declined to remark.

Nvidia additionally plans to focus on the automotive and online game markets, based on sources and public social media postings.

Weckel expects the custom auto market to develop constantly from its present $6 billion to $8 billion vary at 20% a 12 months, and the $7 billion to $8 billion online game custom chip market may improve with the next-generation consoles from Xbox and Sony (NYSE:).

Nintendo’s present Switch (NYSE:) handheld console already contains an Nvidia chip, the Tegra X1. A new model of the Switch console anticipated this 12 months is prone to embrace a Nvidia custom design, based on one supply.

Nintendo declined to remark.

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