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Nvidia chases $30 billion custom chip market with new unit

Nvidia chases $30 billion custom chip market with new unit

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Nvidia chases $30 billion custom chip market with new unit

Nvidia (NVDA.O), opens new tab is building a new business unit focused on designing bespoke chips for cloud computing firms and others, including advanced artificial intelligence processors, according to nine sources familiar with the company’s plans.

The dominant global designer and supplier of AI chips aims to capture a portion of an exploding market for custom AI chips and to protect itself from the growing number of companies interested in finding alternatives to its products.

The Santa Clara, California-based company currently controls about 80% of the market for high-end AI chips, a position that has sent its market value up 40% so far this year to $1.73 trillion after it more than tripled in 2023.

Its customers, which include ChatGPT creator OpenAI, Microsoft (MSFT.O), opens new tab, Alphabet (GOOGL.O), opens new tab and Meta Platforms (META.O), opens new tab, have raced to snap up the dwindling supply of Nvidia chips to compete in the rapidly emerging generative AI sector.

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Nvidia’s H100 and A100 chips serve as a generalized, all-purpose AI processor for many of those major customers. But the tech companies have started to develop their own internal chips for specific needs. Doing so helps reduce energy consumption, and potentially can shrink the cost and time to design.

Nvidia is now attempting to play a role in helping these companies develop custom AI chips that have flowed to rival firms such as Broadcom (AVGO.O), opens new tab and Marvell Technology (MRVL.O), opens new tab, according to the sources who declined to be identified because they were not authorized to speak publicly.

“If you’re really trying to optimize on things like power, or optimize on cost for your application, you can’t afford to go drop an H100 or A100 in there,” Greg Reichow, general partner at venture capital firm Eclipse Ventures said in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”

Nvidia does not disclose H100 prices, which are higher than for the prior-generation A100, but each chip can sell from $16,000 to $100,000 depending on the volume purchased and other factors. Meta has said it plans to bring its total stock to 350,000 H100s this year.

Nvidia officials have met with representatives from Amazon.com (AMZN.O), opens new tab, Meta, Microsoft, Google and OpenAI to discuss making custom chips for them, according to two sources familiar with the meetings. Beyond data center chips, the company has pursued telecom, automotive and video game customers.

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In 2022, Nvidia said it would let third-party customers integrate some of its proprietary networking technology with their own chips. The company has said nothing about the program since, and Reuters is reporting its wider ambitions for the first time.

A Nvidia spokesperson declined to comment beyond the company’s 2022 announcement.

Dina McKinney, a former Advanced Micro Devices (AMD.O), opens new tab and Marvell executive, heads Nvidia’s custom unit and her team’s goal is to make its technology available for customers in cloud, 5G wireless, video games and automotives, according to a LinkedIn profile. Those mentions were scrubbed and her title was changed after Reuters sought comment from Nvidia.

Amazon, Google, Microsoft, Meta and OpenAI declined to comment.

$30 BILLION MARKET

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According to estimates from research firm 650 Group’s Alan Weckel, the data center custom chip market will grow to as much as $10 billion this year, and double that in 2025.

The broader custom chip market was worth roughly $30 billion in 2023, which amounts to roughly 5% of annual global chip sales, according to Needham analyst Charles Shi.

Currently, custom silicon design for data centers is dominated by Broadcom and Marvell.

In a typical arrangement, a design partner such as Nvidia would offer intellectual property and technology, but leave the chip fabrication, packaging and additional steps to Taiwan Semiconductor Manufacturing Co. (2330.TW), opens new tab or another contract chip manufacturer.

Nvidia moving into this territory has the potential to eat into Broadcom and Marvell sales.

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“With Broadcom’s custom silicon business touching $10 billion, and Marvell’s around $2 billion, this is a real threat,” said Dylan Patel, founder of the silicon research group SemiAnalysis. “It’s a real big negative – there’s more competition entering the fray.”

BEYOND AI

Nvidia is in talks with telecom infrastructure builder Ericsson (ERICb.ST), opens new tab for a wireless chip that includes the chip designer’s graphics processing unit (GPU) technology, according to two sources familiar with the talks.

650 Group’s Weckle expects the telecom custom chip market to remain flat at roughly $4 billion to $5 billion a year.
Ericsson declined to comment.

Nvidia also plans to target the automotive and video game markets, according to sources and public social media postings.

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Weckel expects the custom auto market to grow consistently from its current $6 billion to $8 billion range at 20% a year, and the $7 billion to $8 billion video game custom chip market could increase with the next-generation consoles from Xbox and Sony (6857.T), opens new tab.

Nintendo’s current Switch handheld console already includes an Nvidia chip, the Tegra X1. A new version of the Switch console expected this year is likely to include a Nvidia custom design, according to one source.

Nintendo declined to comment. 

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A former OpenAI leader says safety has ‘taken a backseat to shiny products’ at the AI company

A former OpenAI leader says safety has ‘taken a backseat to shiny products’ at the AI company

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A former OpenAI leader says safety has 'taken a backseat to shiny products' at the AI company

A former OpenAI leader who resigned from the company earlier this week said Friday that safety has “taken a backseat to shiny products” at the influential artificial intelligence company.

Jan Leike, who ran OpenAI’s “Superalignment” team alongside a company co-founder who also resigned this week, wrote in a series of posts on the social media platform X that he joined the San Francisco-based company because he thought it would be the best place to do AI research.

“However, I have been disagreeing with OpenAI leadership about the company’s core priorities for quite some time, until we finally reached a breaking point,” wrote Leike, whose last day was Thursday.

An AI researcher by training, Leike said he believes there should be more focus on preparing for the next generation of AI models, including on things like safety and analyzing the societal impacts of such technologies.

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He said building “smarter-than-human machines is an inherently dangerous endeavor” and that the company “is shouldering an enormous responsibility on behalf of all of humanity.”

“OpenAI must become a safety-first AGI company,” wrote Leike, using the abbreviated version of artificial general intelligence, a futuristic vision of machines that are as broadly smart as humans or at least can do many things as well as people can.

Open AI CEO Sam Altman wrote in a reply to Leike’s posts that he was “super appreciative” of Leike’s contributions to the company was “very sad to see him leave.”

Leike is “right we have a lot more to do; we are committed to doing it,” Altman said, pledging to write a longer post on the subject in the coming days.

The company also confirmed Friday that it had disbanded Leike’s Superalignment team, which was launched last year to focus on AI risks, and is integrating the team’s members across its research efforts.

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Leike’s resignation came after OpenAI co-founder and chief scientist Ilya Sutskever said Tuesday that he was leaving the company after nearly a decade.

Sutskever was one of four board members last fall who voted to push out Altman — only to quickly reinstate him. It was Sutskever who told Altman last November that he was being fired, but he later said he regretted doing so.

Sutskever said he is working on a new project that’s meaningful to him without offering additional details.

He will be replaced by Jakub Pachocki as chief scientist. Altman called Pachocki “also easily one of the greatest minds of our generation” and said he is “very confident he will lead us to make rapid and safe progress towards our mission of ensuring that AGI benefits everyone.”

On Monday, OpenAI showed off the latest update to its artificial intelligence m

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US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

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US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

The U.S. Justice Department and TikTok on Friday asked a U.S. appeals court to set a fast-track schedule to consider the legal challenges to a new law requiring China-based ByteDance to divest TikTok’s U.S. assets by Jan. 19 or face a ban.

TikTok, ByteDance and a group of TikTok content creators joined with the Justice Department in asking the U.S. Court of Appeals for the District of Columbia to rule by Dec. 6 to be able to seek review from the Supreme Court if needed before the U.S. deadline. 

On Tuesday, a group of TikTok creators filed suit to block the law that could ban the app used by 170 million Americans, saying it has had “a profound effect on American life.”

Last week, TikTok and parent company ByteDance filed a similar lawsuit, arguing that the law violates the U.S. Constitution on a number of grounds including running afoul of First Amendment free speech protections.

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“In light of the large number of users of the TikTok platform, the public at large has a significant interest in the prompt disposition of this matter,” the U.S. Justice Department and TikTok petitioners said.

TikTok said with a fast-track schedule it believes the legal challenge can be resolved without it needing to request
emergency preliminary injunctive relief.

The law, signed by President Joe Biden on April 24, gives ByteDance until Jan. 19 to sell TikTok or face a ban. The White House says it wants to see Chinese-based ownership ended on national security grounds, but not a ban on TikTok.

The parties asked the court to set the case for oral arguments as soon as practical during the September case calendar. The Justice Department said it may file classified material to support the national security justifications in secret with the court.

Earlier this week the Justice Department said the TikTok law “addresses critical national security concerns in a manner that is consistent with the First Amendment and other constitutional limitations.”

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The law prohibits app stores like Apple and Alphabet’s Google from offering TikTok and bars internet hosting services from supporting TikTok unless ByteDance divests TikTok.

Driven by worries among U.S. lawmakers that China could access data on Americans or spy on them with the app, the measure was passed overwhelmingly in Congress just weeks after being introduced.

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Spotify sued over alleged unpaid royalties

Spotify sued over alleged unpaid royalties

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Spotify sued over alleged unpaid royalties

Music streaming giant Spotify has been sued in a US federal court for allegedly underpaying songwriters, composers and publishers by tens of millions of dollars.

The lawsuit against Spotify USA was filed in New York on Thursday by the Mechanical Licensing Collective (MLC), a non-profit that collects and distributes royalties owed from music streaming services.

The suit alleges that Spotify on March 1, without advance notice, reclassified its paid subscription services, resulting in a nearly 50 percent reduction in royalty payments to MLC.

“The financial consequences of Spotify’s failure to meet its statutory obligations are enormous for Songwriters and Music Publishers,” MLC said.

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“If unchecked, the impact on Songwriters and Music Publishers of Spotify’s unlawful underreporting could run into the hundreds of millions of dollars.”

According to MLC, Spotify reclassified its Premium Individual, Duo and Family subscription streaming plans as Bundled Subscription Offerings because they now include audiobooks.

Royalties paid on bundled services are significantly less. MLC said Premium subscribers already had access to audiobooks and “nothing has been bundled with it.”

“Premium is exactly the same service that Spotify offered to its subscribers before the launch of Audiobooks Access,” it said. In a statement, Spotify said the lawsuit “concerns terms that publishers and streaming services agreed to and celebrated years ago.”

Spotify said it paid a “record amount” in royalties last year and “is on track to pay out an even larger amount in 2024.” “We look forward to a swift resolution of this matter,” the Swedish company said.

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In February, Spotify said it paid $9 billion to musicians and publishers last year, about half of which went to independent artists. 

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