Nvidia (NASDAQ:NVDA) reached record highs last month as shares of the chipmaker rose to $974 on March 8. But investors haven’t had much to cheer since then, as this red-hot stock has since cooled off.
More specifically, Nvidia shares are now trading just over 11% below this record high. Wall Street fears the stock’s bubble may have burst and its artificial intelligence (AI)-fueled growth could come to a halt due to increasing competition in the AI chip market. Therefore, it was no surprise that Nvidia shares fell another 2% on the following April 9th Intel‘S (NASDAQ:INTC) Introducing a new AI chip aimed squarely at Nvidia’s hottest performers.
Let’s see if Nvidia investors have reason to worry after Intel’s recent move to target the fast-growing AI chip market.
Intel takes aim at Nvidia’s AI superiority
Intel has tried hard to break into the AI chip market, but the company’s efforts haven’t gone far. Intel’s potential AI chip revenue pipeline was “well over $2 billion and growing” at the end of 2023, according to CEO Pat Gelsinger. That pales in comparison to Nvidia’s data center revenue of $47.5 billion in fiscal 2024, suggesting the company is currently miles ahead of Intel in the AI chip market.
However, Chipzilla is making another attempt to undermine Nvidia’s AI dominance with its latest Gaudi 3 accelerator. The press release announcing the launch noted that this new Intel chip “delivers an average of 50% better inferences and an average of 40% better power efficiency than Nvidia H100 – at a fraction of the cost.”
The press release goes on to say that Gaudi 3 is estimated to reduce the time required to train the 7 billion and 13 billion parameter Llama2 Large Language Model (LLM) – as well as the 175 billion parameter GPT-3 model – by one Multiples can shorten 50%. Intel added that several companies are ready to deploy the Gaudi accelerators and server manufacturers, and Dell Technologies, Super microcomputer, LenovoAnd Hewlett Packard Enterprise It is expected that systems based on this new chip will also be offered.
Additionally, Intel claims that Gaudi 3 could match the performance of Nvidia’s upcoming H200 AI graphics processing unit (GPU). Provided that Intel’s latest AI chip is based on it Taiwan semiconductor manufacturingDue to the 5 nanometer (nm) manufacturing process, the claim is not a surprising claim. That’s because Nvidia’s current flagship, the H100, is manufactured using a custom 5nm process from TSMC.
Additionally, Nvidia’s upcoming H200 processor will also be based on TSMC’s N5 process, which refers to its 5nm process node. Therefore, investors may think that Intel might actually be able to curb Nvidia’s dominance in the AI chip market thanks to a mix of aggressive pricing and solid performance.
However, investors should note that Nvidia’s H100 GPU was unveiled a few years ago and went into mass production later in 2022. Intel’s Gaudi 3 chip is expected to enter mass production in the third and fourth quarters of 2024. But by the time Intel starts shipping these chips, Nvidia would have gone one better.
Displacing Nvidia is easier said than done
Nvidia announced the Blackwell GPU architecture last month, claiming that this new platform will “enable organizations everywhere to develop and run generative AI in real-time on large language models with trillions of parameters, at up to 25 times lower cost.” and lower energy consumption than its predecessor.”
Additionally, the Blackwell B200 GPU is expected to be four times faster in AI training and 30 times faster in inferencing than the H100. This huge leap in performance of the B200 over the previous generation of Nvidia GPUs is due to the advanced 4nm process node on which the chip is built.
Even better, Nvidia will reportedly price the Blackwell processors aggressively. And given the performance and efficiency gains that Nvidia is promising, it might be able to mitigate any cost advantages that Intel is promising. All of this explains why major cloud computing providers like Amazon, alphabetis Google, Meta Platforms, MicrosoftAnd oracle expected to use the B200.
Nvidia says chips based on the Blackwell architecture will be available later this year, suggesting the company could overtake Intel and maintain its dominant position in the AI chip market. Not surprisingly, Nvidia’s data center revenue will double to $95 billion in 2024, according to analyst estimates.
This suggests that the market expects Nvidia to remain the leading player in the AI chip market, where the company reportedly owns over 80% share. So investors should look past Intel’s AI chip announcement as the new Gaudi 3 processor may not pose much of a challenge for Nvidia, considering that Nvidia will be moving to a new generation of more powerful and efficient chips.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 calls above $57.50 on Intel, long January 2025 calls above $45 on Intel, long January 2026 calls above $395 on Microsoft, short January 2026 $405 calls on Microsoft and May 2024 short $47 calls on Intel. The Motley Fool has a disclosure policy.
Nvidia Stock Down 11% From Record Highs: Will This Artificial Intelligence (AI) Development Bring More Bad News for Investors? was originally published by The Motley Fool