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The flipside to Nvidia’s triumph is the ongoing struggle of its AI competitors.
NVIDIA Corp (NASDAQ: NVDA) has seen a remarkable surge in demand, a trend that has sent ripples through the Artificial Intelligence (AI) sector, leaving rivals scrambling to catch up.
The artificial intelligence industry is currently undergoing a seismic shift, with Nvidia emerging as the indisputable frontrunner. The company’s processors have become the darlings of developers and businesses alike, triggering an insatiable demand that has left even Nvidia itself astounded.
Late on Wednesday, Nvidia dropped a bombshell, projecting a staggering 170% surge in revenue for the current quarter, expected to reach a monumental $16 billion. Nvidia’s announcement caused its shares to rise to more than 2% on Thursday. However, these gains proved to be short-lived, as the broader market’s turbulence led to a flattening of Nvidia’s stock price, narrowly missing the attainment of a record closing figure.
Nvidia’s major strength lies in its Graphics Processing Units (GPUs), a technology that has found its moment of glory in the AI domain. These GPUs have become the backbone of modern AI applications, enabling the training and deployment of large-scale AI models.
The latest fiscal report from Nvidia served as a resounding testament to its dominance. With executives hinting at sustained high demand well into the next year, investors are beginning to question if any other company can genuinely rival Nvidia in producing the caliber of GPUs required for constructing and managing extensive AI models.
AI Rivals Stumble in Nvidia Corp’s Wake
The flipside to Nvidia’s triumph is the ongoing struggle of its AI competitors. Advanced Micro Devices Inc (NASDAQ: AMD), Nvidia’s principal rival in the GPU market, has found itself lagging further behind as Nvidia’s dominance continues to expand.
Following Nvidia’s announcement of fiscal Q2 earnings, AMD’s shares plummeted by 7%. Similarly, Intel Corporation (NASDAQ: INTC), which has consistently missed out on the AI trend, experienced a 4% drop in its shares.
Intel, once a giant in the chip industry, has openly acknowledged the “persistent weakness” across all segments of its business. On its earnings call in July, Intel CEO Pat Gelsinger highlighted the shift in cloud companies’ preferences, emphasizing their focus on securing graphics processors for AI applications rather than Intel’s central processors.
Meanwhile, the release schedule of Intel’s high-end data center GPU, Falcon Shores, has been pushed to 2025. Moreover, the cancellation of its 2023 chip has left Intel with a considerable gap in its product lineup.
AMD, in its bid to compete with Nvidia, has taken notable strategic steps. The acquisition of French AI software firm Mipsology and the development of its own AI software suite called ROCm are indicators of its commitment to penetrating the AI market. However, AMD is faced with a timing challenge.
Despite announcing the flagship AI chip, the MI300 in June, the chip is currently only being sampled in small quantities. The chip’s full-scale market availability is slated “for the next year”.
Raj Joshi, Senior Vice President at Moody’s Investors Services, succinctly captured the prevailing sentiment stating that “there is no meaningful competition for Nvidia’s high-performance GPUs until AMD starts shipping its new AI accelerators in high volumes in early 2024. The window of opportunity for AMD and Intel to gain substantial traction in the AI market is rapidly closing”.