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There has been a significant increase in demand for Nvidia’s AI chips as countries across the world focus on building their own AI models.
This was revealed yesterday (August 28) by Nvidia’s Chief Financial Officer, Colette Kress.
Nvidia’s prediction for higher sales of its AI chips, which power generative AI models like OpenAI’s ChatGPT, didn’t meet investors’ high hopes. However, the company mentioned that it is getting new customers from around the world, including governments that want to create their own AI models and need the hardware to do it.
As AI becomes more important for businesses and governments, countries are turning to Nvidia to supply the necessary hardware to support these efforts.
Kress highlighted this trend with analysts, stating that countries developing their AI applications and models could contribute double-digit billions to Nvidia’s revenue for the financial year ending in January 2025.
This demand for Nvidia chips comes as countries seek to create AI models tailored to their unique needs, including language, culture, and security concerns. For instance, Japan’s National Institute of Advanced Industrial Science and Technology is building an AI supercomputer that uses thousands of Nvidia H200 graphics processors.
Nvidia’s Growing Role in Global AI Development
In recent years, the demand for Nvidia AI chips has skyrocketed, with Nvidia forecasting around $32.5 billion in total revenue for the third quarter ending in October.
This includes significant contributions from countries building their own AI models, which were initially expected to bring in high single-digit billions but have since been revised upwards.
The drive to create AI models tailored to specific national needs is not just about technology; it’s about ensuring that AI systems can operate within the cultural and political contexts of each country.
According to Shane Rau, an analyst at IDC, nations need AI models that are trained on their own data, which often includes sensitive or secret information. This has led to an increased demand for custom hardware and software arrangements, further boosting Nvidia’s sales.
However, there has been a semiconductor war between the US and China as the two countries aim to control the global semiconductor market. This has resulted in Washington restricting exports of semiconductor technologies and chip-making equipment to China, but the effect has been limited so far.
🇺🇸Biden to cut China off from more Nvidia chips.
Goal to limit China's access to "advanced semiconductors that could fuel breakthroughs in AI and sophisticated computers that are critical to (Chinese) military applications"
Nvidia earns 20% of its revenue from China.
Chip war… pic.twitter.com/xYuNZJCrlL
— Genevieve Roch-Decter, CFA (@GRDecter) October 17, 2023
Consequently, this restriction has impacted Nvidia’s sales in China, but it has not dampened the overall global demand for its products. But Nvidia revealed plans to develop chips for the Chinese market amid the US export restriction.
Notably, a recent discovery shows that Chinese institutions employ the Amazon cloud to access US-manufactured chips.
As countries prioritize the development of AI systems that cater to their specific needs, Nvidia’s technology is becoming increasingly essential. The company’s role in this AI-driven world is growing, with its chips powering the next generation of AI models that are expected to shape the future of technology and national security.
