Home Business Nvidia stock investors just got some great news from Amazon and Google

Nvidia stock investors just got some great news from Amazon and Google

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Nvidia stock investors just got some great news from Amazon and Google

Semiconductor company Nvidia (NASDAQ: NVDA) has seen its stock price rise nearly 1,000% since ChatGPT launched in late 2022. That event was the big bang moment for the artificial intelligence (AI) boom, and the subsequent rise in Nvidia stock reflects its critical position in the fast-growing AI sector. economy.

Specifically, Nvidia dominates the data center graphics processing units (GPU) market, accounting for 98% of shipments last year. GPUs accelerate complex workloads, such as training AI models and running AI applications. As a result, Nvidia has secured a monopoly-like market share in AI accelerators.

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To this end, Nvidia regularly highlights custom AI chips from major tech companies such as Amazon (NASDAQ: AMZN) And Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) as a cause for concern. While both companies have custom-designed silicon for their data centers, recent commentary should reassure Nvidia investors.

Amazon Web Services (AWS) is the largest public cloud. It accounted for 31% of cloud infrastructure and platform services spending in the third quarter, almost as much market share as Microsoft The Google Cloud Platform of Azure and Alphabet combined. To better monetize the demand for artificial intelligence, AWS has developed two custom AI chips.

Specifically, AWS Trainium is designed for training machine learning models, and AWS Inferentia is purpose-built to accelerate inference workloads. But AWS recently provided some reassuring context for Nvidia shareholders. “We want to be the absolute best place to run Nvidia,” said Vice President Dave Brown. “At the same time, we think it’s healthy to have an alternative.”

While AWS is clearly trying to gain market share, the attempt is half-hearted as the company also relies on its relationship with Nvidia. For example, AWS was the first major cloud provider to offer Nvidia H200 GPUs, and management rarely mentions its Trainium or Inferentia chips without also emphasizing the importance of its Nvidia partnership.

Amazon CEO Andy Jassy made that clear during the last earnings call. “We have a very deep partnership with Nvidia. We are often their lead partner on most of their new chips,” he told analysts. “I expect we will have a partnership for a very long time.”

Alphabet’s Google Cloud Platform is the third largest public cloud. It accounted for 13% of cloud infrastructure and platform services spending in the third quarter. But the company is well positioned to gain market share thanks to long-term investments in AI. Forrester research recently recognized Google as a leader in AI infrastructure solutions.

Importantly, Google has been developing custom AI accelerators called tensor processing units (TPUs) over the past decade and has been deploying the chips in its data centers since 2015. Still, Nvidia GPUs remain the gold standard. In fact, several analysts estimate that the company has as much as an 80% to 95% market share in the AI ​​accelerator space. That means Google has yet to challenge Nvidia’s dominance, despite a decade of attempts.

Meanwhile, Google Cloud is simultaneously leaning on its relationship with Nvidia. Alphabet CEO Sundar Pichai made the following comment during the third quarter earnings call: “We have a great partnership with Nvidia. We are excited about the GB200s and we will be among the first to offer them at scale.” For context, GB200s refer to a supercomputer chip that combines Grace CPUs and Blackwell GPUs, both designed by Nvidia.

Ultimately, potential competitors like Amazon and Alphabet’s Google will run into a major problem. Nvidia is not only building faster AI accelerators, but has also created an unparalleled ecosystem of software development tools. The company has spent the better part of two decades adding code libraries and pre-trained models to its CUDA platform.

The CUDA software platform allows programmers to write GPU-accelerated applications in domains ranging from autonomous machines to scientific simulation. Competitors will have to overcome that hurdle to have any chance of challenging Nvidia’s dominance of the AI ​​accelerator market, and several analysts see that outcome as highly unlikely, at least for the foreseeable future.

For example Joseph Moore op Morgan Stanley recently wrote: “In general, the market tends to underestimate the difficulty of competing with Nvidia, especially as they have moved to an annual product cadence.” This also applies to Toshiya Hari op Goldman Sachs recently wrote: “We believe Nvidia will remain the de facto industry standard for the foreseeable future, given its competitive advantage that includes hardware and software capabilities.”

Besides software, Nvidia has another key competitive advantage in its vertical integration. The company complements its GPUs with adjacent data center hardware, including CPUs, interconnects and networking equipment. This comprehensive approach allows Nvidia to build data center systems with the “lowest total cost of ownership,” according to CEO Jensen Huang.

The bottom line: At this point, Nvidia shareholders have little to fear from custom chips designed by Alphabet’s Amazon and Google. Instead, the company is well positioned to maintain its market leadership in AI accelerators.

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Suzanne Frey, a director 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. Trevor Jennevine has positions at Amazon and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Nvidia Stock Investors Just Got Some Great News from Amazon and Google, originally published by The Motley Fool

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