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Will this development in artificial intelligence (AI) bring more bad news for investors?

Nvidia (NASDAQ: NVDA) reached record highs last month, with the chipmaker’s shares rising to $974 on March 8. But investors haven’t had much reason to cheer since then, as this red-hot stock has been cooling off since then.

More specifically, Nvidia stock is now trading just over 11% below that record level. Wall Street is concerned that the stock bubble has burst and that artificial intelligence (AI)-driven growth could disappear thanks to increasing competition in the AI ​​chip market. So it wasn’t surprising that Nvidia shares subsequently fell another 2% on April 9 Intel‘S (NASDAQ: INTC) launching a new AI chip, which directly targeted Nvidia’s most popular artists.

Let’s see if Nvidia investors have reason to worry after Intel’s latest move to target the fast-growing AI chip market.

Intel takes aim at Nvidia’s AI supremacy

Intel has tried hard to sink its teeth into the AI ​​chip market, but the company’s efforts haven’t gotten far. At the end of 2023, Intel’s potential revenue pipeline from AI chips was “well above $2 billion and growing,” according to CEO Pat Gelsinger. That pales in comparison to Nvidia’s 2024 data center revenue of $47.5 billion, indicating it is currently miles ahead of Intel in the AI ​​chip market.

However, Chipzilla is taking another stab at undermining Nvidia’s AI dominance with its latest Gaudi 3 accelerator. The press release announcing the launch noted that this new Intel chip “delivers 50% better results on average and 40% better energy efficiency on average than the Nvidia H100 – at a fraction of the cost.”

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The press release added that Gaudi 3 is estimated to be able to reduce the time required to train the 7 billion and 13 billion parameter Llama2 large language model (LLM) – as well as the 175 billion parameter GPT-3 model. 50%. Intel added that several companies will deploy the Gaudi accelerators and server manufacturers Dell Technologies, Super microcomputer, LenovoAnd Hewlett Packard Enterprise are also expected to offer systems based on this new chip.

Furthermore, Intel claims that Gaudi 3 could match the performance of Nvidia’s upcoming H200 AI graphics processing unit (GPU). Considering that Intel’s latest AI chip is built on it Taiwanese semiconductor manufacturing‘s 5-nanometer (nm) manufacturing process is not a surprising claim. That’s because Nvidia’s current flagship, the H100, is manufactured using a custom 5nm process from TSMC.

Furthermore, Nvidia’s upcoming H200 processor will also be based on TSMC’s N5 process, which refers to the 5nm process node. So investors may think that Intel can indeed break Nvidia’s dominant position in the AI ​​chip market thanks to a mix of aggressive pricing and solid performance.

But investors should note that Nvidia’s H100 GPU was unveiled a few years ago and later went into mass production in 2022. Intel’s Gaudi 3 chip is expected to enter mass production in the third and fourth quarters of 2024. But by the time Intel starts shipping these chips, Nvidia would have upped its game.

Pushing Nvidia out is easier said than done

Nvidia announced the Blackwell GPU architecture last month, claiming that this new platform “will enable organizations everywhere to build and run real-time generative AI on large language models with trillions of parameters at up to 25x less cost and energy consumption than his predecessor.”

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Additionally, the Blackwell B200 GPU is expected to be four times faster than the H100 during AI training and 30 times faster during inference. This huge jump in the B200’s performance over the previous generation of Nvidia’s GPUs can be attributed to the advanced 4nm process node on which the chip is built.

In fact, Nvidia is reportedly going to aggressively price the Blackwell processors. And given the performance and efficiency gains Nvidia is promising, it could potentially mitigate any cost benefit Intel is promising. All this explains why major cloud computing providers such as Amazon, Alphabet‘s Google, Meta Platforms, MicrosoftAnd Oracle are expected to deploy the B200.

Nvidia says chips based on the Blackwell architecture will be available later this year, indicating the company could steal Intel’s thunder and maintain its dominant position in the AI ​​chip market. Not surprisingly, Nvidia’s data center revenue is expected to double to $95 billion by 2024, according to analyst estimates.

This suggests that the market expects Nvidia to remain the leading player in the AI ​​chip market, where it reportedly holds more than 80% share. So investors would do well to look past the announcement of Intel’s AI chips, as the new Gaudi 3 processor may not pose much of a challenge to Nvidia as the latter is about to move on to a new generation of more powerful and more efficient chips.

Should You Invest $1,000 in Nvidia Now?

Consider the following before buying shares in Nvidia:

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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. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft , and briefly May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

Nvidia shares are down 11% from record highs: Will this development of artificial intelligence (AI) bring more bad news for investors? was originally published by The Motley Fool

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