The 4.7 million reasons why Nvidia's AI chip dominance will be nearly impossible to overthrow

Nvidia's (NASDAQ: NVDA) revenue and adjusted EPS have climbed triple-digits for three quarters. Investors can expect the tech giant's four-quarter run. Management expected top and bottom lines to rise 234% and 396% year over year in the late April quarter.  

Nvidia's strong earnings have boosted its shares. Nvidia stock rose 82.5% in the fiscal first quarter of 2024, giving it the second-best S&P 500 performer, and its long-term performance is even better. Super Micro Computer, a server specialist, led the index in Q1.  

Nvidia's stock's incredible ascent is due to its AI chip dominance. Nvidia's rapid growth is driven by strong demand for its processors and related technologies that expedite data center AI workloads. GPU chips are the finest general processors for this, and Nvidia is the leading Discrete GPU manufacturer. GPUs are discrete chips, not integrated with CPUs.  

Nvidia is estimated to have 90% of the data center AI GPU chip market and 80% of the data center AI chip market. Some prominent IT businesses have built specialized AI processing chips.  

Even before generative AI, Nvidia's data center business was developing rapidly. In late 2022, OpenAI widely launched their ChatGPT chatbot. Companies want to use generative AI because it opens up a huge range of new AI applications. Nvidia's data center sales are fueled by this enthusiasm.  

Over 4.7 million reasons to keep Nvidia's AI chip dominance. Investors question if Advanced Micro Devices, Intel, or other GPU chip makers will catch up to or exceed Nvidia in the AI GPU chip market.  

Competitors may gain market share. This is because Nvidia can't meet demand for its data center GPUs and related products. I think it's unlikely any firm can steal Nvidia's AI GPU chip crown. A competition is unlikely to match Nvidia's AI-enabling GPU market dominance. a

Nvidia's GPUs can parallelize general and AI computation thanks to CUDA. Nvidia developed CUDA in 2006, thus many developers have been using it for a long time.  

Merriam-Webster defines a virtuous circle as "a chain of events in which one desirable occurrence leads to another which further promotes the first occurrence and so on..." As I described for Arm Holdings, the main CPU chip designer, this virtuous circle works for Nvidia: In short, Nvidia's AI GPU lead has created a virtuous spiral. That virtuous circle gives it a tight hold on the AI GPU market.  

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