The impressive scale of Nvidia’s achievements in powering the booming AI industry is hard to deny; the company recently became the world’s third most valuable company thanks largely to its AI-accelerating GPUs. However, company CEO Jensen Huang has taken to the stage to claim that Nvidia’s GPUs are “so good that even when the competitor’s chips are free, it’s not cheap enough.” Huang further explains that Nvidia GPU pricing isn’t really significant in terms of an AI data center’s total cost of ownership (TCO).
Listen to Jensen talking about competitors selling cheaper chips: even when the competitor’s chips are offered for free, it’s still not cheap enough. $NVDA pic.twitter.com/8NJKHWwf14March 9, 2024
The AI Investor on Twitter / X highlighted the headlining quote in the media clip, above. However, for fuller context, you can watch the YouTube video recorded during Huang’s appearance at the 2024 SIEPR Economic Summit.
Starting at 22:32 of the YouTube recording, John Shoven, Former Trione Director of SIEPR and the Charles R. Schwab Professor Emeritus of Economics, Stanford University, asks, “You make completely state-of-the-art chips. Is it possible that you’ll face competition that claims to be good enough – not as good as Nvidia – but good enough, and much cheaper? Is that a threat?”
Jensen Huang begins his response by unpacking his tiny violin. “We have more competition than anyone on the planet,” claimed the CEO. He told Shoven that even Nvidia’s customers are its competitors, in some cases. Also, Huang pointed out that Nvidia actively helps customers who are designing alternative AI processors and goes as far as revealing to them what upcoming Nvidia chips are on the roadmap. This does indeed sound like quite an extraordinary way of doing business, but Huang’s next claim that Nvidia operates as a “completely open book” while working with almost everyone else in the industry may be harder to believe. Remember there were strong accusations of Nvidia operating a GPU Cartel just recently, with customers reportedly scared to speak to rival GPU / AI accelerator makers for fear of delayed orders.
Shifting back to the Stanford interview, Jensen Huang outlined Nvidia’s currently unassailable USP. The Nvidia CEO said that whereas you could build a chip to be good at one particular algorithm, Nvidia’s GPUs are programmable. Moreover, the Nvidia platform is “a great standard… in every single cloud computer company.” A typical data center that wants to support a wide range of customers from financial services to manufacturing, and so on, will therefore be drawn towards Nvidia hardware.
Free isn’t cheap enough to compete with Nvidia
Huang also sought to provide a contrast that might be counterintuitive to those focused on GPU prices: people who buy and sell chips think about the price of chips, people who operate data centers think about the cost of operations, he clarified.
Of course, companies will be well aware of Total Cost of Ownership (TCO), and what it basically means is that Nvidia’s claimed benefits like time to deployment, performance, utilization, and flexibility are “so good that even when the competitor’s chips are free it’s not cheap enough,” according to Huang.
Concluding his answer to Shoven, the Nvidia CEO underlined that keeping this far ahead, with this unbeatable TCO is Nvidia’s goal. Huang reminded summit attendees that what Nvidia does takes a lot of hard work and innovation, and nothing is taken for granted.
