• Nvidia is establishing a new division for custom chip design targeting cloud computing and AI processors, aiming to reinforce its dominance in AI chips.
  • The move comes amidst heightened competition from tech giants like Microsoft, Google, and Meta, all vying for Nvidia’s GPUs to bolster their AI capabilities.
  • Nvidia’s expansion into custom chip design extends beyond data centres to potential clients in telecommunications, automotive, and gaming industries, including rumoured collaboration with Nintendo for its upcoming Switch console.

According to media reports, up to nine sources revealed that Nvidia is establishing a new business division focused on designing custom chips for cloud computing and advanced artificial intelligence (AI) processors.

This move is expected to further solidify Nvidia’s leadership position in AI chips, with recent years seeing companies like OpenAI, Microsoft, Google, Meta, among others, racing to acquire Nvidia’s graphics processing units (GPUs) to compete in the AI field, propelling its market value to $1.7 trillion, making it one of the “Big Seven” in the US stock market.

As Nvidia’s H100 and A100 are general-purpose AI accelerators, some tech companies have begun developing their own internal chips for specific needs to reduce power consumption and lower costs. Sources said Nvidia sees an opportunity in this and plans to help these companies develop custom AI chips.

Also read: Nvidia’s historic surge with AI-powered chip ignites investor frenzy

The price of H100 will be expensive

While Nvidia has not disclosed prices, the H100 is expected to be expensive. Greg Reichow, partner at venture capital firm Eclipse Ventures, said if companies want to optimise power or cost, they shouldn’t buy generic H100 or A100, “because you only need their computing power.”

Two sources said Nvidia executives have met with representatives from companies like Amazon, Meta, Microsoft, Google, and OpenAI to discuss manufacturing custom chips for them. Besides data centre chips, Nvidia is also seeking clients from the telecommunications, automotive, and video game industries.

There is a huge market for custom data centre chips

Research firm 650 Group’s Alan Weckel estimates the market for custom data centre chips will grow to $10 billion this year and double by 2025. Currently, the market for custom chips designed for data centres is dominated by Broadcom and Marvell.

Sources also revealed that Nvidia is in talks with telecom infrastructure provider Ericsson. Needham analyst Charles Shi said the broader custom chip market was worth about $30 billion in 2023, accounting for about 5% of global chip sales revenue.

Nvidia’s entry into this field could potentially eat into the sales share of Broadcom and Marvell. In the video game sector, there are reports that Nintendo’s upcoming new Switch gaming console, set to be released this year, may adopt Nvidia’s custom design. Currently, Nintendo’s Switch uses Nvidia’s Tegra X1 processor.