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Nvidia boss Jensen Huang:

Special chips for Big Tech

Photo: Rick Wilking / REUTERS

According to insiders, the chip company Nvidia is setting up a new business unit to develop tailor-made chips. These chips are intended for cloud computing companies but also other areas, such as advanced processors for artificial intelligence (AI), the Reuters news agency learned on Friday from people familiar with the matter.

The world's leading developer and supplier of AI chips wants to secure a part of the exploding market for tailor-made AI chips and prepare itself for the fact that a growing number of companies are looking for alternatives to its products.

The Californian company currently controls about 80 percent of the market for high-end AI chips. This has caused Nvidia's market value to rise by 40 percent to $1.73 trillion this year alone, after more than tripling in 2023.

Nvidia's customers include ChatGPT developer OpenAI, Microsoft, Alphabet and Meta. They all currently still need Nvidia chips in order to keep up with the rapidly growing AI business.

Special chips instead of universally applicable AI processors

Nvidia's H100 and A100 chips serve as general purpose, general-purpose AI processors for many of these large customers. However, technology companies have started developing their own in-house chips for specific needs. In this way, energy consumption can be reduced and development costs and times could possibly be reduced. According to the insiders, Nvidia now wants to play a role in helping these companies develop custom AI chips.

Nvidia has met with representatives from Amazon, Meta, Microsoft, Google and OpenAI to discuss making custom chips for those companies, two people familiar with the matter said. In addition to chips for data centers, the company is also targeting customers in the telecommunications, automotive and video game sectors.

Market for custom chips expected to double

In 2022, Nvidia announced that it would allow third-party customers to integrate some of its proprietary networking technology into their own chips. The company has not commented on this program since then, but Reuters is now reporting on the development of the plans for the first time.

An Nvidia spokesman declined to comment, as did Amazon, Google, Microsoft, Meta and OpenAI. Market research firm 650 Group estimates the market for custom data center chips will grow to $10 billion this year and double by 2025. The broader custom chip market was worth about $30 billion in 2023, or about five percent of annual global chip sales.