Nvidia rival AMD gets its own deal with OpenAI threatening Nvidia’s dominance in the AI accelerator market.
Nvidia’s shares are up over 48% over the last year. That’s because the company is involved in the hottest business segment right now, Artificial Intelligence (AI). Nvidia happens to do business in a sexy area of AI; it is the leading manufacturer of graphic processing unit (GPU) chips that are typically used in devices like smartphones and computers. However, GPUs excel as AI accelerators that speed up the processing of information.
Is Nvidia’s leading market share in AI accelerators in danger?
Yes. AMD’s deal gives OpenAI incentive to use its GPUs. No. Nivida remains the leader and will remain on top.
Yes. AMD’s deal gives OpenAI incentive to use its GPUs.
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No. Nivida remains the leader and will remain on top.
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GPUs use parallel processing which means that thousands of cores perform calculations at the same time on huge amounts of data. A Central Processing Unit (CPU), on the other hand, deals with information differently. A CPU processes data sequentially as these chips move from task to task which doesn’t work as well with the matrix multiplication used for AI.
Nvidia’s shares fall after the opening as AMD announces its deal with OpenAI
On Monday morning, Nvidia’s shares declined as much as $4.39 or 2.3%% to $183.33 after one of its rivals, Advanced Micro Devices (AMD) announced a huge multibillion-dollar deal with OpenAI that could eat into Nvidia’s dominant market share. AMD shares soared $45.45 or 27.6% to $210.12 this morning after announcing that OpenAI plans to deploy 6 gigawatts of AMD’s Instinct GPUs. Not only is Nvidia’s position as the AI accelerator leader threatened by AMD’s deal, but other tech companies also such as Google and Amazon have been involved in designing AI chips as well.
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Nvidia’s shares have been rebounding since the opening bell. As of 11:30 am ET, the stock is off only $1.51 or .81% to $186.10
OpenAI gets a warrant to buy 10% of AMD at a sweetheart price
As part of the transaction, OpenAI will receive a warrant giving it the right to purchase as much as 160 million AMD shares for 1 cent apiece. If exercised, OpenAI will end up with 10% of AMD for only $1.6 million. Considering that AMD currently is valued at $342.7 billion, that’s a good deal for OpenAI. Nvidia, as a point of comparison, is the most valuable publicly traded U.S. stock with a valuation of $4.5 trillion.
In late September, OpenAI signed a deal with Nvidia that will see it use 10 gigawatts of Nvidia’s GPUs to power datacenters. With that deal, Nvidia will invest as much as $100 billion in OpenAI. The latter is the AI R&D company that developed ChatGPT.
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