Why do Nvidia’s chips dominate the AI market?

No other firm has benefited from the boom in artificial intelligence (ai) as much as Nvidia. Since January 2023 the chipmaker’s share price has surged by almost 450%. With the total value of its shares approaching $2trn, Nvidia is now America’s third-most valuable firm, behind Microsoft and Apple. Its revenues for the most recent quarter were $22bn, up from $6bn in the same period last year. Most analysts expect that Nvidia, which controls more than 95% of the market for specialist ai chips, will continue to grow at a blistering pace for the foreseeable future. What makes its chips so special?

Nvidia’s ai chips, also known as graphics processor units (gpus) or “accelerators”, were initially designed for video games. They use parallel processing, breaking each computation into smaller chunks, then distributing them among multiple “cores”—the brains of the processor—in the chip. This means that a gpu can run calculations far faster than it would if it completed tasks sequentially. This approach is ideal for gaming: lifelike graphics require countless pixels to be rendered simultaneously on the screen. Nvidia’s high-performance chips now account for four-fifths of gaming gpus.

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