Nvidia and AMD Pivot To AI Over High-End Gaming
There’s gold in them thar hills! Even if the hills themselves are digital, the gold itself is still real. That’s the key to a recent pivot in the tech industry, especially when it comes to graphics card manufacturers.
For years, Nvidia Corporation and Advanced Micro Devices, Inc. (AMD) have been dueling for control of graphics processing units (GPUs) in desktops, laptops, and gaming devices. Every few years, one or the other would land on a particularly strong chipset or software feature that would power them to the top of the heap. Outside of that, both have also offered products for enterprise, data centers, and high-end entertainment.
Recently, there’s been a shift in both companies, led primarily by Nvidia. While other companies like OpenAI, Alphabet, or Anthropic want to create impressive large language models and other generative AI projects, Nvidia and AMD want to power those services. This week offered two stories highlighting that shift, one concrete and another mere rumor at the moment.
Let’s start off with the rumor. Over on X/Twitter, rumormonger Kepler said that AMD’s upcoming RDNA 4 line-up of products would not compete on the high-end. This information was backed up by Moore’s Law Is Dead, who stated that AMD was having issues with the upcoming product, choosing instead to focus on nailing the next high-end lineup and catching up to Nvidia’s AI product.
The second story was over at Barron’s, which reports that Nvidia’s top-of-the-line H100 GPUs are entirely sold out, until 2024 at the least. Folks like former Meta consultant John Carmack noticed that the prices of H100s were four times above market value in April, and the situation hasn’t gotten better.
That’s a problem for existing companies and start-ups trying to build their AI platforms, as Nvidia not only offers the best hardware currently, it also has its best-in-class CUDA development platform. Many developers are used to working with CUDA, meaning competitors like AMD and Alphabet have to catch up in terms of mindshare and expertise.
Money On My Deep Mind
Both companies have their minds on the AI gold rush. For Nvidia, the results are already clear. Its stock price is up 180% this year so far, with the company valued at over $1 trillion. For the first quarter for fiscal year 2024, its data center division — which includes its AI products — reached $4.28 billion in revenue, up 14% year-over-year. In contrast, the gaming division was down 38% to 2.24 billion. Nvidia is also already preparing for its next AI product: the GH200.
AMD is busy trying to come up from behind, with the June announcement of its MI300X GPU built specifically for AI. “We think about the data center AI accelerator [market] growing from something like $30 billion this year, at over 50% compound annual growth rate, to over $150 billion in 2027,” AMD CEO Lisa Su said at the time, according to CNBC. Unfortunately for AMD, Nvidia has around an 80% market share in AI. The bright side: with the H100 out-of-stock, AMD has space to sell the MI300X (and smaller MI300A) as an alternative when it releases later this year.
The focus is clear even in both companies’ branding efforts. Look up Nvidia and AMD on Google search right now and you’ll see “NVIDIA: World Leader in Artificial Intelligence Computing” and “AMD | together we advance_AI” in their main site descriptions. While it might be a bubble, the money being spent on AI in the short-term is very, very real. Both want to be the vendor of choice for all of these new startups that’ll burn out in the next few years.
Will The Bubble Pop?
Of course, going all-in on AI is smart now, but will that demand hold up long-term? It’s hard to tell. As I’ve noted before, the services being offered as “AI” now are something a few companies have been doing for years at this point. OpenAI just gave it a new face and branding focus.
“If you look at the recent earnings transcripts from S&P 500 companies, the mentions of AI were everywhere. So to some extent it’s just a buzzword companies use to gain notoriety and to infuse a bit of optimism into their forward guidance,” State Street Global Advisors managing director Matt Bartolini told CNN Business when asked about a potential AI bubble.
“You also have a pretty narrow, myopic marketplace in terms of companies leading on AI. A lot of major tech stocks have done well, but smaller companies haven’t. In a bubble, you’d see a significant amount of stocks throughout the area benefiting,” he added. “What is happening is that AI has been around for a really long time, and now there’s a branding bubble, so to speak, where it’s the subject of a lot of press and general conversations around the dinner table. But I don’t think from a stock perspective we’ve reached a full scale bubble.”
At the same time, The Wall Street Journal notes that the AI market is looking similar to the dot com bubble: big sweeping claims, a lot of venture capital, and very little in the way of useful products.
“There’s a huge boom in AI — some people are scrambling to get exposure at any cost, while others are sounding the alarm that this will end in tears,” Sparkline Capital founder Kai Wu told the WSJ. “Investors can benefit from innovation-led growth, but must be wary of overpaying for it.”
At the end of the day though, most of the companies at the head of the AI boom aren’t going anywhere. OpenAI is backed by Microsoft; Google has different market areas like Search and Cloud; and Nvidia and AMD still have other enterprise and consumer offerings. So if this is a bubble and it pops, they’ll all certainly survive. It’s just a matter of what spaces go dry and fallow while VC money chases AI and other companies seek to cram AI into sectors that don’t really have great uses for the technology. (See: NFTs in 2021 and 2022.) And I guess, what happens to all those highly-paid AI-focused employees when the bubble pops, likely in shades of the tech layoff spree of 2022–2023.
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