The first question AI chipmaker Nvidia CEO Jensen Huang had to answer at its annual shareholder meeting on Wednesday was how the company will handle increasing competition.
Nvidia is the clear leader with more than 80% of the AI chip market share, but competition is heating up, with tech giants such as Intel and AMD, as well as startups such as Etched, Cerebras and D-Matrix, all vying for position in the highly lucrative, multi-billion dollar market.
Around 40% of Nvidia's revenue is thought to come from four companies: Microsoft, Meta, Amazon and Alphabet, all of which have the means to fully develop AI chips on their own in the future.
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That means Nvidia's current customers could one day become its biggest competitors.
Hwang spoke about competitive threats on Wednesday without naming any specific rivals. In response to a shareholder question, he said Nvidia's strategy is to make AI chips with the “lowest total cost of ownership.”
Those five words don't necessarily mean that Nvidia's chips, which cost more than $30,000 apiece, are the cheapest on the market.
Rather, when potential customers consider performance, the chip's operating costs and its broad range, Nvidia's chips may offer the “lowest total cost” overall.
“NVIDIA's platform is broadly available across every major cloud provider and computer manufacturer, creating a large and attractive installed base for developers and customers. This makes our platform even more valuable to our customers,” Huang told CNBC.
Nvidia CEO Jensen Huang (Photo: SAM YEH/AFP via Getty Images)
Nvidia's chips have been around for around 30 years, but were used as graphics cards until recently.
Huang believed the chip could do much more: In 2016, he asked his team to build an AI server with it. The server ended up being the size of a briefcase and cost $129,000 to build. He then handed it over to OpenAI as a gift.
Currently, OpenAI's ChatGPT is powered by tens of thousands of Nvidia chips.
At the conference, Huang emphasized that Nvidia is ahead in AI chips because it began investing in them 10 years ago, pouring in billions of dollars and deploying thousands of engineers.
That first-mover advantage has paid off: Nvidia is now one of the world's most valuable companies, valued at $3.338 trillion last week.
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