NVIDIA’s Cloud AI Demand Surges, Yet China Presents Hurdles; 2024 High-End AI Server Shipments Disappointing

nVidia, the tech giant, has reported its highest-ever revenue in its data center segment, thanks to the surging demand for AI servers from major North American cloud service providers (CSPs). However, the recent US government sanctions targeting China have had an impact on NVIDIA’s business in the region. Despite the company’s strong GPU shipments and the introduction of compliant products like the H20, L20, and L2, Chinese cloud operators are still in the testing phase, making significant revenue contributions unlikely in Q4. The situation is expected to improve gradually from Q1 2024. The ban continues to affect China’s Foundry market, potentially leading to a drop below 4% in high-end AI server shipments by Chinese CSPs next year.

According to TrendForce, North American CSPs such as Microsoft, Google, and AWS will remain the driving force behind high-end AI servers in the coming years, with estimated shipments of 24%, 18.6%, and 16.3% respectively for 2024. On the other hand, Chinese CSPs like ByteDance, Baidu, Alibaba, and Tencent (BBAT) are projected to have a combined shipment share of approximately 6.3% in 2023, which could decrease to less than 4% in 2024 due to the ban’s impact.

In response to the risk of expanded restrictions arising from the US ban, TrendForce predicts that Chinese companies will continue to purchase existing AI chips in the short term. NVIDIA’s GPU AI accelerator chips, including existing A800 or H800 inventories and new models like H20, L20, and L2 specifically designed for the Chinese market, remain a top priority. In the long term, Chinese CSPs are expected to accelerate their efforts, with Alibaba’s T-Head and Baidu leading the way in developing their own chips. They will rely on foundries like TSMC and Samsung for production. Additionally, major Chinese AI firms such as Huawei and Biren are also actively developing general-purpose AI chips to cater to local businesses. These companies aim to establish a domestic AI server ecosystem in China, with the support of the Chinese government through localized projects involving telecom operators.

While developing high-end chips in China poses challenges due to limited access to advanced manufacturing technology, there may be opportunities in the mid to low-range edge AI server market. These servers, which have lower AI computational demands, are used in applications like commercial ChatBOTs, video streaming, internet platforms, and automotive assistance systems. They may not fall under the restrictions imposed by the US, providing a potential growth direction for Chinese firms in the AI market.

Background Information

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About Google:

Google, founded by Larry Page and Sergey Brin in 1998, is a multinational technology company known for its internet-related services and products. Initially for its search engine, Google has since expanded into various domains including online advertising, cloud computing, software development, and hardware devices. With its innovative approach, Google has introduced influential products such as Google Search, Android OS, Google Maps, and Google Drive. The company's commitment to research and development has led to advancements in artificial intelligence and machine learning.

  

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About Microsoft:

Microsoft, founded by Bill Gates and Paul Allen in 1975 in Redmond, Washington, USA, is a technology giant known for its wide range of software products, including the Windows operating system, Office productivity suite, and cloud services like Azure. Microsoft also manufactures hardware, such as the Surface line of laptops and tablets, Xbox gaming consoles, and accessories.

  

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About nVidia:

NVIDIA has firmly established itself as a leader in the realm of client computing, continuously pushing the boundaries of innovation in graphics and AI technologies. With a deep commitment to enhancing user experiences, NVIDIA's client computing business focuses on delivering solutions that power everything from gaming and creative workloads to enterprise applications. for its GeForce graphics cards, the company has redefined high-performance gaming, setting industry standards for realistic visuals, fluid frame rates, and immersive experiences. Complementing its gaming expertise, NVIDIA's Quadro and NVIDIA RTX graphics cards cater to professionals in design, content creation, and scientific fields, enabling real-time ray tracing and AI-driven workflows that elevate productivity and creativity to unprecedented heights. By seamlessly integrating graphics, AI, and software, NVIDIA continues to shape the landscape of client computing, fostering innovation and immersive interactions in a rapidly evolving digital world.

  

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About Samsung:

Samsung, a South Korean multinational conglomerate, has established itself as a global leader in various industries, including electronics, technology, and more. Founded in 1938, Samsung's influence spans from smartphones and consumer electronics to semiconductors and home appliances. With a commitment to innovation, Samsung has contributed products like the Galaxy series of smartphones, QLED TVs, and SSDs that have revolutionized the way we live and work.

  

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About TSMC:

TSMC, or Taiwan Semiconductor Manufacturing Company, is a semiconductor foundry based in Taiwan. Established in 1987, TSMC is a important player in the global semiconductor industry, specializing in the manufacturing of semiconductor wafers for a wide range of clients, including technology companies and chip designers. The company is known for its semiconductor fabrication processes and plays a critical role in advancing semiconductor technology worldwide.

  

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Technology Explained

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AWS: Amazon Web Services (AWS) is a cloud platform powered by Amazon that enables users to access cloud computing services, such as storage, data analytics, and distributed computing. It offers users the ability to utilize both on-demand and pay-as-you-go computing services, making it a great option for the computer industry. It offers a wide range of services with great flexibility for a variety of uses. It can help companies build powerful web and mobile applications, run large-scale analytics, quickly provision servers and other services, design sophisticated architectures for data storage, and more. AWS provides access to a wide range of services such as virtualization, storage, database, monitoring, analytics, and other services that can help organizations increase agility, manage complexity, and remain on the cutting edge of technology. Many big and famous organizations use AWS services to give them a competitive edge, and more and more companies are turning to this service for their computer needs.

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Foundry: A foundry is a dedicated manufacturing facility focused on producing semiconductor components like integrated circuits (ICs) for external clients. These foundries are pivotal in the semiconductor industry, providing diverse manufacturing processes and technologies to create chips based on designs from fabless semiconductor firms or other customers. This setup empowers companies to concentrate on innovative design without needing substantial investments in manufacturing infrastructure. Some well-known foundries include TSMC (Taiwan Semiconductor Manufacturing Company), Samsung Foundry, GlobalFoundries, and UMC (United Microelectronics Corporation).

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GPU: GPU stands for Graphics Processing Unit and is a specialized type of processor designed to handle graphics-intensive tasks. It is used in the computer industry to render images, videos, and 3D graphics. GPUs are used in gaming consoles, PCs, and mobile devices to provide a smooth and immersive gaming experience. They are also used in the medical field to create 3D models of organs and tissues, and in the automotive industry to create virtual prototypes of cars. GPUs are also used in the field of artificial intelligence to process large amounts of data and create complex models. GPUs are becoming increasingly important in the computer industry as they are able to process large amounts of data quickly and efficiently.

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