Nvidia currently controls about 80% of the high-end AI chip market, a position that has increased its stock market value to $1.82 trillion. Tech giants like OpenAI, Microsoft, Alphabet, and Meta have been racing to secure their chips to compete in the rapidly emerging generative AI sector.
In an attempt to reduce power consumption and potentially reduce design cost and time, some of Nvidia's largest customers have begun developing their own in-house chips for specific needs.
But according to ReutersNvidia intends to combat that potential threat to its business by entering the lucrative custom chip market.
In 2022, Nvidia announced that it would allow third-party customers to integrate some of its proprietary networking technology with their own chips. Now, according to sources, Nvidia officials have met with representatives of its largest technology clients to discuss manufacturing custom chips for them.
Dina McKinney, a former AMD and Marvell executive, heads Nvidia's custom unit, and beyond data centers, her team's goal is to make its technology available to customers in the cloud, wireless 5G, gaming and automobiles.
According to estimates by research firm 650 Group, the data center custom chip market will grow to $10 billion this year and will double by 2025. The overall custom chip market was worth about $30 billion in 2023. , which is equivalent to approximately 5% of annual global chip sales.
Broadcom and Marvell currently dominate custom silicon design for data centers. Nvidia's entry into this territory could affect its sales. Nvidia shares rose 2.75% following the Reuters report, while Marvell shares fell 2.78%.
