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For now, Nvidia’s (NASDAQ:NVDA) chips, which other companies use to create AI, are considered vastly superior to those of NVDA’s competitors. As a result, Nvidia can charge exorbitant amounts for those chips. But the AI chips of one of Nvidia’s major competitors, Intel (NASDAQ:INTC), appears to be starting to gain great respect in the marketplace, while another competitor, AMD (NASDAQ:AMD), has launched a new offering that could become popular. This will have important implications for NVDA stock holders.
Meanwhile, all three major cloud services providers, Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) — have launched their own AI chips, and several other major firms could follow suit. Given these points, I think there’s a very good chance that the prices firms are willing to pay for Nvidia’s chips will drop greatly in 2024, resulting in a 15%-25% pullback by NVDA stock at some point next year.
Intel and AMD Have Launched Credible Alternatives
After analyzing the results of data presented by Nvidia, tech website STH has concluded that Nvidia’s H100, its top AI chip, is twice as fast as Intel’s Gaudi 2 AI chips. However, the Gaudi 2 semiconductors sell for “less than half the price” as the H100 and have “a much simpler system architecture,” according to STH. Moreover, in terms of total lifetime expenses, the publication reported that Gaudi 2 has an even greater cost advantage over H100. Also noteworthy is that the Gaudi 2 chips are “supply-constrained, but less so than the H100.”
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The fact that the Gaudi 2 chips are “supply constrained” strongly suggests that many companies already see them as a viable alternative to the H100. I believe that, throughout 2024, as the huge rush to develop AI services eases somewhat, more firms will opt for the much cheaper but still proficient Gaudi chips. As a result, the prices of Nvidia’s offerings will drop meaningfully.
Moreover, Intel’s Gaudi 3 chips, expected to debut in 2024, will have much more memory than their predecessor. This development is expected to “lead to serious performance gains in AI learning and training” for Gaudi 3 versus Gaudi 2. As a result, the Gaudi 3 is expected to hold its own versus Nvidia’s new offering, the H200, which is also expected to launch next year.
Meanwhile, AMD has introduced its own AI chip, creating another alternative for those companies looking to avoid paying extremely high prices for Nvidia’s offerings. AMD claims that, compared to the H100, the product provides “comparable AI training performance and significantly higher AI inferencing performance.”