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Can Microsoft Compete with NVIDIA?



Key Points
Microsoft recently revealed its first custom chips aimed at cloud and AI services.
The chips are designed to reduce dependency on NVIDIA and take a new approach to cloud infrastructure.
Despite this, NVIDIA is likely to retain its top position among chipmakers due to the collaborative nature of AI advancement.
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It’s unlikely that NVIDIA NASDAQ: NVDA will lose its top spot in the AI world anytime soon, as it has a significant lead and market share. However, Microsoft NASDAQ: MSFT and Advanced Micro Devices NASDAQ: AMD pose a significant risk to NVIDIA’s market share.
While the AI market is expected to continue growing, any loss of market share could negatively impact NVIDIA’s position in the market over time.
Microsoft is well-positioned to challenge NVIDIA’s dominance in the AI market, especially due to its significant contribution to cloud services and its increasing market share in AI-related activities.
It’s important to note that much of the cloud and AI industry is built on collaborative efforts involving hardware, software, and services from various vendors. While Microsoft is developing its own chips, it is not severing ties with NVIDIA or Advanced Micro Devices. Instead, it aims to advance AI infrastructure and services through existing partnerships.
Microsoft’s Azure cloud architecture is set to feature its first custom chips in 2024, which will reduce its reliance on NVIDIA. The chips are designed to optimize Microsoft’s cloud and AI stack, with a focus on reducing power usage, improving efficiency, and lowering costs.
The two custom chips, Azure Maia 100 and Azure Cobalt 100, are intended for cloud and AI-specific purposes and will support future AI development by Microsoft and its clients. Additionally, Microsoft will continue to use NVIDIA and AMD microchips, GPUs, and accelerators in its cloud infrastructure.
NVIDIA will also run its generative AI foundry service on Microsoft’s Azure platform, highlighting the ongoing partnership between the two companies.
Market analysts were more influenced by the OpenAI incident, which strengthened Microsoft’s position. The recent board restructure and the reinstatement of Sam Altman as the company’s leader have bolstered investor confidence in Microsoft.
From a technical standpoint, Microsoft’s stock has been on an uptrend following the Q3 earnings release, reaching new highs and indicating overbought market conditions. While a price correction is possible, a consolidation phase is more likely before the stock resumes its upward movement.
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