NVIDIA’s GPU Chips Are Demanded By Everyone. It Might Not be enough.

(CTN News) – There seems to be a mad rush to purchase Nvidia’s semiconductor chips these days.

Its sales of graphic processing units (GPUs) have surged since ChatGPT ignited an AI frenzy, propelling it to an impressive first-quarter earnings performance and boosting its valuation to over $1 trillion.

It appears, however, that Nvidia’s chips may not be enough to meet demand, with several top executives warning that demand is outpacing supply.

Soaring demand

Increasing interest in artificial intelligence has played a significant role in driving demand for Nvidia’s semiconductors.

Large computers are used to power artificial intelligence products such as ChatGPT. According to data from New Street Research, these applications run on specialized GPUs. Nvidia holds a 95% share of this market.

Earlier this week, the Financial Times reported that four Chinese enterprises ramping up their AI efforts had ordered $5 billion worth of the company’s GPUs amid growing fears that the Biden administration may restrict their access to US exports.

Musk is also a fan – he purchased thousands of GPUs for his generative AI project xAI in April, and he confirmed in May that “Twitter [now X] and Tesla are certainly buying GPUs.”.

Nvidia’s second-quarter revenue forecast smashed Wall Street’s expectations by 50% in May, indicating that demand for its chips is soaring.

As a result of these results, shares of the company surged by 24% on May 25, adding $190 billion to its total market value in a single day.

Dwindling supply?

In spite of this, there are indications that Nvidia might not be able to produce enough GPUs to meet demand.

In the short term, demand is outstripping supply for everybody, according to Amazon Web Services CEO Adam Selipsky, referring to the high-end H100 chips required to train AI models.

On a second-quarter earnings call earlier this month, Cloudflare CEO Matthew Prince noted that there had been “a lot of constraints” in procuring the H100s, while CloudWeave’s CTO stated that the chips may be unavailable until the end of the year, according to Barron’s.

Earlier this year, Insider reported that Nvidia GPUs are already in such short supply and so expensive that venture capitalists are buying them directly for their portfolio companies, since GPUs are now in such short supply.

As a result, while it’s undeniable that Nvidia’s chip business is booming, the next challenge for the company as it attempts to join the so-called “Magnificent Seven” tech stocks might be keeping up with the sudden increase in demand.

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