Nvidia chases $30 billion custom chip market with new unit

By Max A. Cherney and Stephen Nellis

SAN FRANCISCO (Reuters) – Nvidia is building a new business unit focused on designing bespoke chips for cloud computing firms and others, including advanced artificial intelligence processors, according to nine sources familiar with the company’s plans.

The dominant global designer and supplier of AI chips aims to capture a portion of an exploding market for custom AI chips and to protect itself from the growing number of companies interested in finding alternatives to its products.

The Santa Clara, California-based company currently controls about 80% of the market for high-end AI chips, a position that has sent its market value up 40% so far this year to $1.73 trillion after it more than tripled in 2023.

Its customers, which include ChatGPT creator OpenAI, Microsoft, Alphabet and Meta Platforms, have raced to snap up the dwindling supply of Nvidia chips to compete in the rapidly emerging generative AI sector.

Nvidia’s H100 and A100 chips serve as a generalized, all-purpose AI processor for many of those major customers. But the tech companies have started to develop their own internal chips for specific needs. Doing so helps reduce energy consumption, and potentially can shrink the cost and time to design.

Nvidia is now attempting to play a role in helping these companies develop custom AI chips that have flowed to rival firms such as Broadcom and Marvell Technology, according to the sources who declined to be identified because they were not authorized to speak publicly.

“If you’re really trying to optimize on things like power, or optimize on cost for your application, you can’t afford to go drop an H100 or A100 in there,” Greg Reichow, general partner at venture capital firm Eclipse Ventures said in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”

Nvidia does not disclose H100 prices, which are higher than for the prior-generation A100, but each chip can sell from…