Illustration: Binay Sinha
By Cade Metz, Karen Weise & Mike Isaac
In September, Amazon said it would invest up to $4 billion in Anthropic, a San Francisco start-up working on artificial intelligence (AI).
Soon after, an Amazon executive sent a private message to an executive at another company. He said Anthropic had won the deal because it agreed to build its AI using specialised computer chips designed by Amazon.
Amazon, he wrote, wanted to create a viable competitor to the chipmaker Nvidia, a key partner and kingmaker in the all-important field of AI.
The boom in generative AI over the last year exposed just how dependent big tech companies had become on Nvidia. They cannot build chatbots and other AI systems without a special kind of chip that Nvidia has mastered over the past several years. They have spent billions of dollars on Nvidia’s systems, and the chipmaker has not kept up with the demand. So Amazon and other giants of the industry — including Google, Meta and Microsoft — are building AI chips of their own. With these chips, the tech giants could control their own destiny. They could rein in costs, eliminate chip shortages and eventually sell access to their chips to businesses that use their cloud services.
While Nvidia sold 2.5 million chips last year, Google spent $2 billion to $3 billion building about a million of its own AI chips, said Pierre Ferragu, an analyst at New Street Research. Amazon spent $200 million on 100,000 chips last year, he estimated. Microsoft said it had begun testing its first AI chip.
But this work is a balancing act between competing with Nvidia while working closely with the chipmaker and its increasingly powerful chief executive, Jensen Huang.
Huang’s company accounts for more than 70 percent of AI chip sales, according to the research firm Omdia. It supplies an even larger percentage of the systems used in the creation of generative AI Nvidia’s sales have shot up 206 per cent over the past year, and the company has added about a trillion dollars in market value.
What’s revenue to Nvidia is a cost for the tech giants. Orders from Microsoft and Meta made up about a quarter of Nvidia’s sales in the past two full quarters, said Gil Luria, an analyst at the investment bank DA Davidson.Nvidia sells its chips for about $15,000 each, while Google spends an average of just $2,000 to $3,000 on each of its own, according to Ferragu. “When they encountered a vendor that held them over a barrel, they reacted very strongly,” Luria said. Companies constantly court Huang, jockeying to be at the front of the line for his chips. He regularly appears on event stages with their chief executives, and the companies are quick to say they remain committed to their partnerships with Nvidia. They all plan to keep offering its chips alongside their own.
Rival sheet
Google spent $2-3 billion on building about a million of its own AI chips
Amazon spent $200 million on 100,000 chips
Microsoft said it had begun testing its first AI chip
Competitors have used their investments in high-profile AI start-ups to fuel use of their chips
Pentagon plans AI programme to estimate critical mineral prices
The US Department of Defense plans to develop a programme to estimate prices and predict supplies of nickel, cobalt and other critical minerals, a move aimed at boosting market transparency but one that throws a new.
The programme, which received little attention after it was announced, is part of Washington’s broader efforts to jumpstart US production of critical minerals used in weapons manufacturing and the energy transition. US output lags market leader China partly because attempts to build new American mines can be heavily influenced by commodity price swings. Jervois Global, for example, announced last year it would suspend construction of an Idaho cobalt project due in part to low market prices, even while Chinese cobalt miners — financially backed by Beijing — said they would boost production of the battery metal in a bid for greater market share.
First Published: Jan 30 2024 | 12:45 AM IST