All Tech companies including OpenAI have initiatives for their own chips. Nobody talks about Intel.
Tech companies have the following options:
1. Buy Nvdia high performance stack with stable and fast support and deploy your SW developers to quickly get started
2. Buy AMD whatever stack and deploy your SW developers to make a lot of ground work
3. Develop and deploy your own chips and use your SW developers to make your SW from scratch but exactly as you need it
The only reason they might go with No. 2 is if AMD gives them the HW more or less for free but maybe even then will mix 2 + 3 if they don't want 1. And AMD deal is showing exactly this, AMD has to give free quity to get a customer for their HW.
What people don't get, who in their right mind would switch from one vendor lock-in to another with the difference on investing SW development into the 2nd???? The resources spend on AMD will bind customers to AMD. It doesn't matter if RoCm is open source as long as it runs only on AMD. If RoCm would run on any AI chip (including Nvidia) then we would have a case of an interesting switch but then the question comes up, why buy AMD if RoCm doesn't require it?
On huge GPU clusters running inferencing the utilization of GPUs is key.
Imagine you have 1 million GPUs and you have 99% utilization of theoretical performance in the system with inferencing. That would mean 10k of GPUs are basically idle and draw power. You could now try to identify which ones are idle but you won't find them because utilization is a dynamic process so while all GPUs are under load not all are running 100% performance beause of interconnects and networking not providing data fast enough so your whole network becomes a bottleneck.
So what you need is a very smart routing process of computation requirements on the whole cluster. This is pure SW issue and not HW issue. This is the SW Nvidia has been working on for years and where AMD is years behing.
This is also why Jensen is absolutely right to say that competitors can offer their chips for free because Nvidia's key in TCO performance is the idea of one giant GPU so SW and networking allowing for highest utilization of a data center. You can't build a GPU the size of 1 million GPUs so you have to think of the utilization problem of a network of GPUs.
In the real world utilization rates are way below 100% so every % better of utilization is way more worth than the price of single GPUs. The idea here is that the company providing 2-3x higher utilization can easily ask for like 5x higher pricing per chip and will still deliver a better TCO.
AMD was desperate enough to sell 10% of their company to get 1 customer.
The issue here is now, that every large customer of AMD will now probably ask for equity. AMD has put itself into a pit hole with that deal.
If I were Hyperscaler CEO, I would basically ask for the a similiar deal as OpenAI or no business. Sorry Lisa Su but as a CEO giving equity to a customer is an absolute red flag because it starts a negative spirale you can't stop.
It seems that no matter the discount, OpenAI wasn't ready to make deal without equity. This tells you exactly how AMD is seen in the AI world.
OpenAI will take the compute for free and help AMD to rise stock value but it won't help AMD one bit because if AMD remains in the current position then OpenAI and Hyperscalers can get great deals with equity from AMD. The incentive isn't now to improve AMD to be competitive but to squeeze everything out of a company being desperate enough to give equity to customers.
And AMD will feel this. Nvidia will remain dominant because of ecosystem and supply. AMD can't easily replace Nvidia in supply chain and Nvidia is already strongly entrenched in many AI compute operations. And on the other side Hyperscalers are focused on their own chips (even OpenAI LOL) so they will tell AMD "Give us equity or no deal". This deal might be really the worst AMD deal yet because AMD is telling the world "here, you can get free AI compute from us financed by our equity". And while it might push AMD share price the very share price will drop 80-90% like any other one in case of an AI bubble pop.
And now imagine what will happen when OpenAI makes deals with Nvidia and AMD. Do you think Hyperscalers will just watch?
I expect Musk to make a $1 trillion deal soon. I guess, that's why he wants to get the $1 trillion from Tesla.
And do you think Meta, Amazon, Microsoft and Google will stand by while Altman and Musk are buying future supply from Nvidia and AMD?
I love that. As an investor in Nvidia, I hope that these future promises will push the stock 4-5x quickly in Cisco fashion because then I can sell and retire in my 40s with a huge pile of money watching the bubble explosion on some beach on an island :)
This is all assuming that the government will be able to bail them out of trouble. But the bond market / interests rates / inflation and government debt mean they could so serious damage to the country if they tried.
There is one answer to this question which is called options. Selling short term OTM CCs with half of premium being used to buy ITM Calls (1/3 protection of the CC), OTM Calls (protection against gap up) and longterm OTM Puts (earn money when Nvidia nose dives).
The console market is low margin because they seem to find someone ready to take low margin (e.g. AMD). Nvidia was in console market before but left it due to low margin. Nvidia only sells old low development chip with probably good margin to Nintendo. The chips in the Switch 2 are using node from 2020 and are super cheap in manufacturing and Nvidia had low efforts in developing them.
AMD however has to design new special APUs for Xbox and PS. Why do they do that? They could just decide to step away from the tender but they won't because they seem to be desperate for any business. Jensen was like that 20 years ago but he has learned that some business you simply step away from.
and what is China's market for High Tech chips outside of China?
Will you buy an AI GPU coming from China on which you will train your sensitive data?
People, really create some facts without checking some simple basic things. Huwai was banned for modems in the Western world but sure we will buy their AI GPUs LOL.
And at the same time how can it be that Chinese companies want the far inferior H20 or soon B20 instead of anything coming from China itself??? Nvidia has warned us that they can't provide the demand for H20 chips due to supply but yes sure Chinese chips will kill Nvidia lol.
Nvidia would probably not fail because they work already very closely with TSMC and have teams sitting there directly.
Also Nvidia could even afford to burn 100s of billions of dollars since they are becoming the most profitable company in the world with probably passing Apple this year.
BUT then Nvidia would compete with TSMC and that is a problem because Nvidia is building up a cash and supply moat. Why should Nvidia build TSMC competition if they can simply buy 95% of the packaging supply at TSMC so competitors like AMD and others struggle to get supply? By booking everything at TSMC, Nvidia can easily keep their market share even if competitors improve their products.
This is a huge differences to many industries where most companies have their own production. Imagine there would be only 1 car manufacturer and all other car companies would only design. And now 1 car company would book 100% of supply from the manufacturer. What would the other car design companies do? They would get out of business even if they design better cars.
Nvidia has done this before and that was in the 90s. By speeding up design and releasing new products and more products 2-3x faster than any competitor. The result was that from 90 competitors in 1993, there was only 1 left in 2003 for Nvidia in gaming GPUs.
And Nvidia is doing that again by speeding up their roadmap cadence and as well as booking all supply. Nvidia is crashing competition not only with a great product but by removing their competitors' option to place their product in the market.
TSMC works very closely with their customers and does everything they can to foster good relations with them. They would not allow any one company to completely push out all the others, they know it would be bad for them in the long run.
At the very least, Apple would stop them. They'd never allow anyone to stop production of their precious Apple Silicon.
Nvidia having 4 customers at 60% is good news because it was 90% 2 years ago.