Nvidia and AMD’s different deals show that while AI chatbots may be commoditized, the chips aren’t
One enigma I’m noticing in the AI boom?
The publicly available chatbots, effectively the best universal manifestation of artificial intelligence we have, feel more or less the same to me. That is, commoditized.
Maybe this is a skill issue; I’m not the most high-tech person. That being said, I have experienced substantial performance gaps between paid and free versions, and am aware that more specialized tools offer better tailored results for certain tasks (i.e. Claude Code). But still, I’m Gemini-first, but polyAImorous when it comes to chatbot usage.
Based on how Big Tech companies treat GPUs, the inputs used to train and run many chatbots, those seem to be anything but commoditized.
Two of the AI chip deals reached by Advanced Micro Devices, the No. 2 in GPUs, have involved the company forking over the rights to potentially massive equity stakes in the company in exchange for securing these buyers. First was OpenAI, then Tuesday’s pact with Meta.
Lisa Su and co. seemingly can’t get customers on normal terms the way Jensen Huang and co. can.
Nvidia, which reports earnings Wednesday after the close, enjoys a dominant market position. Sure, it subsidizes its customers’ acquisitions of chips, but it could be argued that this is just a way in investing in its own success by trying to make sure the company has as many viable future clients as possible. Nvidia and Meta’s “multi-year, multi-generational strategic partnership” that will see the social media giant buy millions of GPUs in the former didn’t involve the chip designer needing to give Mark Zuckerberg any potential equity exposure.
Nvidia’s offerings are able to command a significant premium because its hardware not only comes with a track record, but it’s also attached to the CUDA software system that AI developers are comfortable with.
In a sense, some of the best industry comps here are found in energy (something AI data centers chock-full of GPUs need a lot of!).
Different forms of crude can be refined into the same kind of gasoline; your car won’t know the difference. Similarly, hydropower, solar power, or natural gas can all be used to generate electricity, and as long as the lights are on, people won’t be able to tell which one it was.
