According to Reuters, Nvidia (NASDAQ:NVDA) is launching a new division aimed at designing custom-made chips for cloud computing entities and other sectors, including cutting-edge AI processors.
NVDA rose 1% in premarket trading Friday.
This move represents a part of Nvidia's effort to seize opportunities in the booming custom AI chip market and to safeguard its business against rising competition.
The company, headquartered in Santa Clara, California, holds an approximately 80% share in the high-end AI chip market. This dominance has significantly contributed to a 40% increase in its market value this year, reaching $1.73 trillion, following a more than threefold growth in 2023.
Nvidia's clientele, featuring some of the world’s biggest companies like Microsoft, Alphabet, OpenAI, and Meta Platforms, are scrambling to buy Nvidia's chips, which are in limited supply, for their ventures into the rapidly evolving generative AI domain.
Per Reuters, Nvidia has been engaging in discussions with leading tech giants about producing specialized chips for their needs.
The chipmaker, which witnessed breakneck growth in 2023, is expanding its focus to include sectors like telecom, automotive, and gaming, in addition to data center chips.
Research from 650 Group projects the data center custom chip market could reach $10 billion this year and potentially double by 2025.
Elsewhere, analysts from Needham estimate the overall custom chip market was valued at around $30 billion in 2023, representing about 5% of the global annual chip sales.