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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Is it worse to be disliked or ignored? Nvidia is too big for the latter, so the former will have to do. The chipmaker that dominates the market for artificial intelligence hardware is in the crosshairs of Chinese antitrust regulators, other chipmakers, and maybe even its own customers. These mounting challenges are a nuisance, but also a compliment.
The company founded by Jensen Huang is virtually the only game in town for high-performance AI chips known as GPUs. The exceptionalism extends to its finances. Nvidia’s sales for the current quarter, for example, are likely to be 60 per cent larger than a year earlier, say Morgan Stanley analysts. It will account for $223bn of a $300bn market by 2027, according to Bank of America, towering over closest peer AMD.
Not everyone celebrates this American success story. Nvidia’s dominance has given the US government a stick with which to beat its major trade rival, China. Export controls deprive Chinese buyers of the company’s raciest ranges. Attempts to use homemade alternatives from companies like Huawei have met with limited success.
The antitrust probe launched by China’s markets regulator on Monday won’t much change that balance of power, though it could throw some grit in the wheels. China makes up just 15 per cent of Nvidia’s revenue, but that sum is still growing at a 34 per cent clip. Even with the White House keeping Nvidia’s newest chips off the menu, market access is worth having.
There’s more subtle pushback closer to home. Customers, from Amazon to Google to Facebook, are busily creating their own chips. Google’s TPUs are a viable alternative to Nvidia’s GPUs for some kinds of AI activity. So is Amazon’s Trainium2 chip, pitched as a cost-effective AI option for customers of the ecommerce giant’s cloud computing business.
Facebook owner Meta and Microsoft are working on their own chips too — though US tech companies are quick to say that their goal is to supplement, not replace, Nvidia.
Besides, anyone wanting to take on Nvidia must contend not just with its chip nous, but its bountiful profit. Huang’s company generates earnings equivalent to about 60 per cent of its revenue, higher than Apple, Microsoft, Alphabet and Intel have managed any time this century, according to LSEG data.
That gives Huang a lot to play with. He can invest Nvidia’s riches to keep its products out in front, acquire companies in adjacent markets, or even put a lid on prices. He can also pay fines or sacrifice some Chinese revenue — if it comes to that — without breaking a sweat. Given the financial goodies Nvidia enjoys as a result of its dominance, it’s no surprise that ants are gathering on all sides. They should be easy to hold at bay.
