NVIDIA, a leading player in the gaming and AI chip industry, has experienced significant success, but its founder, Huang Renxun, once remarked, "We are only 30 days away from bankruptcy." Despite its robust profits, the company faced financial crises in the past. The AI boom since late 2022 has fueled NVIDIA's revenue and profits, making it the third-largest global publicly traded company with a market value briefly exceeding $2 trillion.

Perfect Business Model:

NVIDIA's GPU (Graphics Processing Unit) invention revolutionized the gaming industry, and its AI business received a boost during the AI boom. The company controls over 80% of the AI acceleration market, maintaining its dominance with strategic acquisitions and proprietary technologies. NVIDIA's GPUs, designed for gaming, also excel in AI computations, making them a crucial infrastructure for AI systems. The company's business model, outsourcing chip manufacturing to industry leaders like TSMC and Samsung, ensures it always uses cutting-edge chip fabrication processes.

Challenges from Competitors:

Despite NVIDIA's almost perfect business model, competitors like AMD pose challenges. AMD, a long-time competitor in gaming chips, has ventured into AI processing with products like the MI300 chip. While AMD's market share is growing, NVIDIA's stronghold remains formidable. Intel, too, is revamping its GPU strategy to compete in cloud-based AI, emphasizing cost efficiency.

Startups Taking Unconventional Paths:

While established players like AMD and Intel compete directly, startups like Graphcore, Cerebras, and Groq are exploring ASIC (Application-Specific Integrated Circuit) architectures for cloud-based AI computing. These startups face challenges in establishing both efficient hardware and competitive software ecosystems. The AI chip market, once buoyant for startups, is now more challenging due to increased competition and the involvement of tech giants.

Threats from Major Tech Companies:

The most significant threat to NVIDIA comes from its largest customers - Amazon, Google, Microsoft, and Meta - which are investing heavily in capital expenditures to purchase NVIDIA's AI chips. These tech giants are also developing their AI chips, potentially reducing dependence on NVIDIA. Google's TPU, Amazon's Trainium and Inferentia, and Microsoft's Maia 100 indicate a growing trend of tech companies designing their AI hardware.

Conclusion:

While NVIDIA continues to dominate the AI chip market, challenges from competitors, startups, and major tech companies loom large. The evolving landscape poses both opportunities and threats, and the company must adapt to stay at the forefront of the rapidly changing AI chip industry.