Data-Center AI Chips Charm Wall Street

The year 2023 began with a slowdown in the semiconductor industry on everyone’s mind. There was optimism that the data-center market would continue to buck the trend. The artificial intelligence (AI) data-center chips, nevertheless, surpassed even the wildest forecasts made in 2022. Nvidia’s data-center business tripled from the previous year and was constrained by supply rather than demand.

On May 30, 2023, Nvidia achieved a trillion-dollar valuation, driven by its data-center AI business. Nvidia became the first semiconductor company to achieve this feat and made data-center AI chips the fastest-growing market segment.

In 2023, Nvidia’s H100 became the dominant AI accelerator in production, and the company previewed its next-generation product H200, with a 2x performance boost expected over the previous generation. Intel’s Gaudi2 demonstrated that it can compete against Nvidia, with comparable performance numbers on selected MLPerf benchmarks. AMD further enhanced its MI300 line of products with performance comparable to Nvidia’s H100.

Hyperscalers continued to introduce next-generation AI-chip products. Google, Tesla, and Meta introduced new chips. Start-ups, however, were unable to gain sizable market share and continued their struggle.

We don’t expect the AI-chip market’s party bus to slow down in 2024. AMD and Intel’s products should start competing with Nvidia in 2024, and some of the start-ups should start establishing themselves in the niche market in 2024.