Nvidia (NVDA -1.81%) Every chip designer is in an enviable position. The company dominates the high-growth artificial intelligence (AI) chip market, and this leadership has led to triple-digit revenue growth for NVIDIA in recent quarters and a soaring stock price. Over the past five years, the stock is up an astounding 2,600%, and it’s on track to maintain that momentum this year, rising more than 180%.
The top chip company has internal chip projects, so it has competitors ranging from other chip designers like Advanced Micro Devices and Intel to its own customers. For example, customers like Meta Platforms and Amazon are building their own AI chips to complement their Nvidia graphics processing unit (GPU) suites. Nvidia is also competing against up-and-coming companies such as Cerebras Systems, which is aiming to launch an initial public offering (IPO) soon.
While this list of competitors may sound worrying for Nvidia and its investors, Nvidia head Jensen Huang recently said something that sounds like bad news for competitors.
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most powerful GPU
First, let’s consider where Nvidia stands today. The company focused on serving the video gaming community with GPUs in its early days, but has now expanded its GPUs into many other areas. And what makes it stand out is AI. Customers are flocking to Nvidia for GPUs to power their data centers and projects. There’s one reason for that. That means NVIDIA’s GPU is the most powerful.
This year, the company launched its H200 chip, which delivers twice the inference performance of the previous generation, and quickly reached double-digit billion-dollar revenues. Nvidia recently announced that the H200 represents its fastest production increase to date.
Now, Nvidia is heading towards an even bigger announcement with the release of its Blackwell architecture and its most powerful chip yet. The company aims to ramp up production this quarter and generate billions of dollars in revenue from the platform almost immediately.
As mentioned earlier, there is a lot of competition in the AI chip market, and these competitors’ products are lower priced than Nvidia’s products. In fact, Amazon’s cloud computing division, Amazon Web Services, has also developed an AI chip called Trainium with cost-conscious customers in mind. One concern some investors have is that the pursuit of savings could drive customers away from Nvidia in favor of other players.
However, CEO Jensen Huang made comments during the company’s recent earnings call that indicate where NVIDIA stands on customer costs, which could be very telling for rivals. may be considered bad news.
“Maximum Possible Profit”
Huang says performance per watt is important because even the largest data centers have limited power. “Our performance per watt is very competitive compared to our competitors, so we deliver the highest possible revenue to our customers,” says Huang.
This means that even if customers pay more upfront for Nvidia’s GPUs, higher performance translates into higher revenue. This makes up for the initial investment and may make Nvidia products the best value for customers in the long run. This comes up when potential customers consider their AI options, and some may choose Nvidia.
Does this mean investors in NVIDIA’s rivals need to worry? Not necessarily. Nvidia isn’t putting other AI chip designers out of business. The AI market is predicted to reach $1 trillion by the end of the decade, and multiple providers of AI accelerators and related products are needed to ensure competitors can succeed without dethroning Nvidia.
But Nvidia investors should take Huang’s comments as great news, as they suggest that Nvidia has overcome one of its biggest risks and maintains its position as the leader in AI chips. is.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Adria Cimino has a position at Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Intel, Meta Platforms, and Nvidia. The Motley Fool recommends the following options: February 2025 $27 short call on Intel. The Motley Fool has a disclosure policy.
