New plans for Azure could leave less room for Nvidia.
New plans for Azure could leave less room for Nvidia.
Microsoft (MSFT +1.08%) is planning a big change to its Azure cloud computing data centers starting next year. It will rely much more on its custom-designed silicon than on leading graphics processing units (GPUs) like those from Nvidia (NVDA -1.84%). It's already made significant progress in expanding workloads for its Maia 200 chips, and it expects its next-generation Maia 300 chips to deliver significant improvements when it starts deploying them next year.
"Starting next calendar year, we will scale our Maia family to multi-gigawatt deployments, making it the primary inference system for our own product and services," CEO Satya Nadella said. That's great news for its custom chip partner, Marvell Technology (MRVL -1.65%), and bad news for Nvidia.
Nvidia is losing data center market share
Nvidia's extreme dominance of the data center GPU space during the first few years of the artificial intelligence (AI) boom left its market share with nowhere to go but down. Its biggest customers, including the hyperscalers and leading AI frontier labs, have developed custom solutions that can handle AI workloads, and that can deliver better price performance on specific tasks than Nvidia's GPUs.
That said, GPUs offer far greater flexibility in terms of the types of tasks they can perform, making them particularly valuable for companies deploying servers to sell compute capacity to third parties with dynamic demands. Notice that Microsoft is starting its Maia expansion by focusing on its own products and services, not on leasing Maia compute capacity to third parties looking to cut costs on their OpenAI GPT-based applications.
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Their use, though, could expand over the long run. Alphabet (GOOG +0.37%) (GOOGL +0.45%), which has been building its own custom AI chips for longer than any of its competitors, has seen strong adoption of its Tensor Processing Units (TPUs) by its Google Cloud customers for training and inference. Apple used TPUs to train Apple Intelligence, and Anthropic is using gigawatts worth of TPUs to develop its large language models.
While Nvidia can continue to grow sales extremely quickly, other chipmakers' growth rates are likely to outpace it. That's reflected in its P/E valuation, which now sits below those of its biggest rivals.
Averytin News Financial update.