Nvidia Opponents: Who Are the AI Chip Alternate options?

Nvidia (NVDA) was one of many best-performing shares within the S&P 500 in 2024, having almost tripled in worth. It has grow to be one of many best-known AI shares in recent times, as a result of its high-performance graphics processing items (GPUs) are in excessive demand for AI purposes.

In response to Jon Peddie Analysis, the marketplace for add-on GPUs grew 47.9% between the second quarter of 2023 and the second quarter of 2024 (the newest quarter for which knowledge is out there) [0]

Nvidia is the most important participant on this market, and its GPUs energy a number of the most distinguished AI merchandise, corresponding to OpenAI’s ChatGPT. Nevertheless it isn’t a monopoly, and there are a couple of publicly traded corporations that compete with Nvidia.

Nvidia controls greater than four-fifths of the marketplace for add-on GPUs. However there are two different corporations with some market share: Superior Micro Units (AMD) and Intel (INTC).

Supply: Jon Peddie Analysis.

Earlier than graphics processing items turned prized for industrial computing actions corresponding to working AI fashions and Bitcoin mining, they have been primarily utilized in gaming PCs and online game consoles — to, as their identify suggests, course of graphics.

AMD has been Nvidia’s primary rival ever since their gaming days, however each corporations now derive most of their income from promoting chips and providers to knowledge facilities. AMD isn’t fairly as specialised in AI chips as Nvidia is, and it has a fraction of its market share. However in 2023, a number of of the world’s largest tech corporations switched from utilizing Nvidia chips to AMD’s Intuition MI300X chip for brand spanking new AI initiatives.

Intel might be extra of a family identify than AMD or Nvidia. In case you’re studying this text on a Home windows laptop, there’s a great likelihood there’s an Intel processor in it. Nevertheless, Intel is newer to the marketplace for GPUs and different AI chips than Nvidia and AMD.

Intel launched each its first GPU and its first specialised AI chip in 2022 — though as proven on the graph above, it hasn’t made a lot of a dent available in the market shares of Nvidia and AMD.

Collectively, Nvidia, AMD and Intel make up nearly 100% of the marketplace for AI chips, however these three should not totally alone within the chipmaking area. Many large tech corporations are growing their very own AI {hardware}, too — they only don’t promote very a lot of it in the meanwhile. These minor chipmakers embrace:

In some circumstances, these corporations have negligible shares of the general AI chip market as a result of they’ve primarily developed chips for “in-house” use — to energy their very own AI merchandise and programs.

For instance, Microsoft is a significant backer of OpenAI, the maker of ChatGPT. Likewise, Amazon is a significant shareholder of Anthtropic, a personal firm that developed Claude, a big language mannequin (LLM) that competes with ChatGPT. Alphabet is the maker of Gemini, one other ChatGPT rival.

The businesses listed within the earlier part management tiny shares of the AI chip market — however that doesn’t imply they’re tiny corporations. All of them are blue-chip tech shares, and all besides IBM and Qualcomm are price trillions of {dollars}. A well-diversified portfolio will possible have publicity to some or all of those shares, both by way of index funds or particular person shares.

In relation to Nvidia’s greatest rivals, AMD and Intel, it’s onerous to say what the long run holds. Wall Road analysts usually imagine that there’s a spot for AMD within the chip market of the long run, however they’re extra pessimistic about Intel.

Of the analysts surveyed by TipRanks who cowl AMD, 73% give it a “purchase” ranking, with the remaining ranking it a “maintain.” That’s not a nasty proportion, though it’s decrease than Nvidia’s. (For reference, 92.5% of TipRanks-surveyed analysts overlaying Nvidia price it a “purchase,” with the remaining ranking it a “maintain.”)

Nvidia and AMD have been vying for management of the GPU marketplace for many years. Nvidia has the lead proper now, however AMD has not too long ago had some successes with its AI chipmaking efforts, corresponding to large orders from Microsoft, Meta (META) and OpenAI.

Nevertheless, analysts are extra bearish on Intel, which entered the AI chip market later and has didn’t get as a lot traction as Nvidia or AMD. As proven above, Intel presently accounts for lower than 1% of the add-on GPU market. Of the analysts surveyed by TipRanks who cowl Intel, 76% price it a “maintain,” and 21% price it a “promote,” with solely 3% ranking it a “purchase.”