Nvidia Faces Mounting Challenge as AI Chip Race Heats Up

Global technology companies are stepping up efforts to challenge Nvidia's effective dominance of the artificial intelligence chip market.

Nvidia fell 0.22% to close at $214.86 on the Nasdaq on May 26. The Philadelphia Semiconductor Index, by contrast, jumped 5.53% in New York trading. While Nvidia, the leading AI chip stock, weakened, shares of its rivals surged. Qualcomm rose 4.48% to $248.82, while Intel gained 3.07% and Google added 1.54%.

The intensifying competition in AI semiconductors appears to have weighed on Nvidia's shares. Bloomberg, citing people familiar with the matter, reported that ByteDance, the parent of short-video platform TikTok, signed a deal to buy millions of Qualcomm application-specific integrated circuits, or ASICs, for AI data centers. The deal suggests Qualcomm, long a leader in smartphone chips, is being recognized as competitive in the AI server infrastructure market.

Other big tech companies are also moving into the AI chip market. Google began supplying its in-house Tensor Processing Unit, or TPU, chips for AI training and inference to external data centers in the first quarter of this year. Intel also declared in February that it would strengthen its graphics processing unit, or GPU, business.

Demand has recently been rising for alternative AI chip suppliers as customers look beyond Nvidia's dominance. Nvidia's limited supply has struggled to keep pace with the rapid expansion of AI businesses, while prices have also surged.

Even so, Nvidia's grip on the market may not be easily broken despite the strong push from tech rivals. Kim Sang-yeop, an analyst at KB Securities, said Nvidia still holds a competitive edge in the AI chip market because its business spans chips, networking and software. As big tech companies continue to expand AI investment, he added, Nvidia is set to remain a beneficiary for the time being.

Oh Hyun-ah, Hankyung.com reporter 5hyun@hankyung.com