How countries developing AI models are driving Nvidia’s increased chip demand
Nvidia's AI chip demand surges as countries develop AI models tailored to their needs. Despite US-China semiconductor tensions, global interest in Nvidia remains strong.
The demand for Nvidia’s AI chips has surged as nations globally invest in developing their own AI models.
This development was announced on August 28 by Nvidia’s Chief Financial Officer, Colette Kress.
Although Nvidia's forecast for increased sales of its AI chips, which support generative AI models such as OpenAI’s ChatGPT, fell short of investors’ expectations, the company is attracting new global customers. Governments are among these new clients, seeking to build their own AI systems and requiring the necessary hardware.
With the growing significance of AI for businesses and governments, countries are turning to Nvidia for the essential technology to support these initiatives.
Kress shared with analysts that countries working on AI applications and models might contribute tens of billions to Nvidia’s revenue for the fiscal year ending in January 2025.
This rising demand for Nvidia chips reflects the global effort to create AI models customized to specific national needs, including language, cultural, and security considerations. For example, Japan’s National Institute of Advanced Industrial Science and Technology is developing an AI supercomputer using thousands of Nvidia H200 graphics processors.
Nvidia’s expanding influence in global AI development
Recently, the demand for Nvidia’s AI chips has surged dramatically, with the company projecting around $32.5 billion in total revenue for the third quarter ending in October.
This forecast includes significant contributions from countries developing their own AI models, which were initially expected to generate high single-digit billions but have since been adjusted upwards.
The push to create AI models that fit specific national requirements is driven not only by technological needs but also by the desire to ensure that AI systems function effectively within each country’s unique cultural and political environment.
Shane Rau, an analyst at IDC, explains that nations need AI models trained on their own data, which often includes sensitive or confidential information. This has led to a greater demand for custom hardware and software solutions, further driving Nvidia’s sales.
Despite a semiconductor conflict between the US and China, with Washington imposing export restrictions on semiconductor technologies and chip-making equipment to China, Nvidia’s global demand remains strong. Although these restrictions have impacted Nvidia’s sales in China, the company has plans to develop chips for the Chinese market despite the US export limits.
Interestingly, recent findings reveal that Chinese institutions use Amazon cloud services to access US-manufactured chips.
As countries increasingly focus on AI systems tailored to their specific needs, Nvidia’s technology is becoming indispensable. The company’s role in the AI-driven landscape is expanding, with its chips playing a crucial role in shaping the future of technology and national security.
