Nvidia extends its AI ambitions to the cloud

Nvidia said it is moving faster to a “new business model” of selling AI services directly to large companies and governments, potentially putting it on a collision course with the big tech companies that are its largest customers.

The move comes as some of the leading tech companies are designing chips to handle the huge data-crunching demands of AI, reducing their need for Nvidia’s chips in the long term.

Nvidia chief executive Jensen Huang on Wednesday said the company had started to make its AI services available through the cloud platforms of groups including Google and Microsoft. Both of them are among the biggest buyers of Nvidia’s chips to train their AI models, while Google now also designs its own AI chips and Microsoft is widely expected to follow suit.

The chipmaker has said its services, which include selling access to supercomputers to train AI models and supplying its own pre-trained large AI models, will soon generate “hundreds of millions of dollars” of revenue, opening up a new software business to add to its existing chip sales.

Nvidia’s increasingly complex relationship with its largest customers comes as generative AI services such as OpenAI’s ChatGPT have opened a big new market for AI chips. In a call with analysts to discuss Nvidia’s latest earnings on Wednesday, Huang said generative systems had brought an “inflection point” after a decade of work on artificial intelligence that has led a much wider range of companies to start experimenting with the technology.

Nvidia’s share price has taken off this year on hopes that its position as the largest supplier of the GPUs used to train large AI models will make it one of the biggest beneficiaries of generative AI. The shares jumped another 8 per cent in after-market trading on Wednesday, taking the gain this year to 54 per cent, after the company issued a forecast that suggested it was recovering from a downturn in its gaming business since the peak of the coronavirus pandemic.

The company said it expected revenue this quarter to reach $6.5bn, above the $6.2bn that Wall Street had been expecting, as it starts to bounce back from a sharp downturn in the second half of last year. Sales of graphics cards used for gaming fell 46 per cent in the latest quarter, to $1.83bn, but were still ahead of most forecasts.

For the final quarter of its latest financial year, Nvidia reported pro forma earnings of 88 cents per share and revenue of $6.05bn, compared to expectations of earnings of 81 cents a share and revenue of $6bn. A year before, it reported pro forma earnings of $1.32 per share and revenue of $7.64bn.