Nvidia Rivals: Who Are the AI Chip Alternate options?

Nvidia (NVDA) was one of many best-performing shares within the S&P 500 in 2024, having practically tripled in worth. It has change into one of many best-known AI shares in recent times, as a result of its high-performance graphics processing items (GPUs) are in excessive demand for AI purposes.

In accordance with Jon Peddie Analysis, the marketplace for add-on GPUs grew 47.9% between the second quarter of 2023 and the second quarter of 2024 (the most recent quarter for which knowledge is offered) ^[0]

Nvidia is the largest participant on this market, and its GPUs energy among the most outstanding AI merchandise, comparable to OpenAI’s ChatGPT. However it isn’t a monopoly, and there are a couple of publicly traded corporations that compete with Nvidia.

Nvidia controls greater than four-fifths of the marketplace for add-on GPUs. However there are two different corporations with some market share: Superior Micro Units (AMD) and Intel (INTC).

Supply: Jon Peddie Analysis.

Earlier than graphics processing items grew to become prized for industrial computing actions comparable to working AI fashions and Bitcoin mining, they have been primarily utilized in gaming PCs and online game consoles — to, as their identify suggests, course of graphics.

AMD has been Nvidia’s most important rival ever since their gaming days, however each corporations now derive most of their income from promoting chips and companies to knowledge facilities. AMD isn’t fairly as specialised in AI chips as Nvidia is, and it has a fraction of its market share. However in 2023, a number of of the world’s largest tech corporations switched from utilizing Nvidia chips to AMD’s Intuition MI300X chip for brand new AI tasks.

Intel might be extra of a family identify than AMD or Nvidia. In case you’re studying this text on a Home windows pc, there’s an excellent probability there’s an Intel processor in it. Nevertheless, Intel is newer to the marketplace for GPUs and different AI chips than Nvidia and AMD.

Intel launched each its first GPU and its first specialised AI chip in 2022 — though as proven on the graph above, it hasn’t made a lot of a dent available in the market shares of Nvidia and AMD.

Collectively, Nvidia, AMD and Intel make up nearly 100% of the marketplace for AI chips, however these three aren’t fully alone within the chipmaking area. Many huge tech corporations are creating their very own AI {hardware}, too — they simply don’t promote very a lot of it for the time being. These minor chipmakers embody:

In some instances, these corporations have negligible shares of the general AI chip market as a result of they’ve primarily developed chips for “in-house” use — to energy their very own AI merchandise and programs.

For instance, Microsoft is a significant backer of OpenAI, the maker of ChatGPT. Likewise, Amazon is a significant shareholder of Anthtropic, a non-public firm that developed Claude, a big language mannequin (LLM) that competes with ChatGPT. Alphabet is the maker of Gemini, one other ChatGPT rival.

The businesses listed within the earlier part management tiny shares of the AI chip market — however that doesn’t imply they’re tiny corporations. All of them are blue-chip tech shares, and all besides IBM and Qualcomm are value trillions of {dollars}. A well-diversified portfolio will doubtless have publicity to some or all of those shares, both via index funds or particular person shares.

With regards to Nvidia’s greatest opponents, AMD and Intel, it’s exhausting to say what the longer term holds. Wall Road analysts typically imagine that there’s a spot for AMD within the chip market of the longer term, however they’re extra pessimistic about Intel.

Of the analysts surveyed by TipRanks who cowl AMD, 73% give it a “purchase” score, with the remaining score it a “maintain.” That’s not a nasty proportion, though it’s decrease than Nvidia’s. (For reference, 92.5% of TipRanks-surveyed analysts masking Nvidia price it a “purchase,” with the remaining score it a “maintain.”)

Nvidia and AMD have been vying for management of the GPU marketplace for many years. Nvidia has the lead proper now, however AMD has just lately had some successes with its AI chipmaking efforts, comparable to huge orders from Microsoft, Meta (META) and OpenAI.

Nevertheless, analysts are extra bearish on Intel, which entered the AI chip market later and has did not get as a lot traction as Nvidia or AMD. As proven above, Intel at the moment accounts for lower than 1% of the add-on GPU market. Of the analysts surveyed by TipRanks who cowl Intel, 76% price it a “maintain,” and 21% price it a “promote,” with solely 3% score it a “purchase.”