Amazon’s cloud computing division has decided to delay the use of Nvidia’s most advanced “superchip” in order to wait for a newer, more powerful model. Investors are worried about a drop in demand during Nvidia’s $2.3tn product cycle.
In March, Silicon Valley chipmaker announced the launch of a new processor generation dubbed Blackwell. This was just a few months after its predecessor Hopper started shipping to customers. Nvidia CEO Jensen Huang claimed that the new products were twice as powerful when it comes to training large language models. This is the technology behind OpenAI ChatGPT.
Amazon Web Services is the largest cloud computing company in the world. It announced that it has “fully transitioned from” a plan to utilize Nvidia’s Grace Hopper, which was released in August. Instead, they are using its successor Grace Blackwell.
The company stated that the move was “sensible” because “the window between Grace Hopper’s and Grace Blackwell’s appearances is small”.
Nvidia refused to comment before its quarterly earnings report, which is scheduled for Wednesday. The company cited rules governing the quiet period.
Analysts expect that the chipmaker will report that its sales tripled during its most recent quarterly period, due to a spending frenzy by Big Tech firms on artificial intelligence technologies. Some investors are beginning to wonder how long the company can continue its extraordinary revenue growth.
Morgan Stanley analysts wrote to their clients that while Big Tech companies pledged to continue investing tens billions of dollars in building out data centres infrastructure for AI in this year, there was “anxiety [on Wall Street] regarding a pause before Blackwell”.
The production of new Blackwell chips is expected to increase over the course this year. Analysts anticipate that they will be delivered during the fourth quarter. Analysts at Citi have noted that there is a potential “air pocket” of demand for AI chip after the long wait time for Nvidia chips last year dissipated.
In September 2022, chips based on Nvidia’s Hopper architecture such as the highly sought-after graphics processing units H100 went into full production. The Grace Hopper superchip (also known as GH200) combines several H100 GPUs with high-speed memory and connectivity, along with a central processor unit.
The GB200 is the first Blackwell product that will be available.
Amazon or Nvidia did not confirm the amount of the order. Analysts from HSBC estimated that a GB200, which contains two B100 chips will cost up to $70,000. An entire server with this new technology could cost up to $3mn.
AWS offers other Nvidia products, including the H100s, to its cloud clients. AWS, one of Nvidia’s biggest customers, is likely to worry investors who are already concerned that tech companies will delay purchases while they wait for Blackwell’s launch.
The demand for Nvidia H100 chips was outstripping supply throughout last year as OpenAI’s ChatGPT, a breakthrough AI technology, sparked a massive investment wave in AI infrastructure from cloud and internet companies.
Since the beginning of 2024 the long waiting times for H100 chips has decreased.
Nvidia stock value has nearly doubled since the start of the year, largely due to investor confidence in the demand for AI chips. However, since March’s GPU Technology Conference where the Blackwell chip was announced by the chipmaker, shares have not shown a consistent rise.
Nvidia struggled to balance supply and demand between product upgrades in the past. The recent surges in demand of chips for video games, cryptocurrency mining and other uses during the Covid-19 Pandemic was followed by a glut.
Morgan Stanley analysts said that they are confident in the fact that even though the supply of Nvidia’s last-generation chip is more readily available, “in the interim, we see new cloud, enterprise, and sovereign customers taking up all the available supply of Hopper”.
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