TL;DR:
- Microsoft’s technology chief, Kevin Scott, reports improved access to Nvidia’s AI chips.
- Demand for Nvidia GPUs surged with the launch of Microsoft-backed ChatGPT.
- Scott mentions that while supply is still tight, it’s gradually improving.
- Nvidia projects a remarkable 170% revenue growth for the current quarter.
- Nvidia’s market dominance led to a significant increase in gross margins.
- ChatGPT’s traffic has experienced a decline for three consecutive months.
- Microsoft plans to offer access to Microsoft 365 Copilot to large organizations in November.
- Scott hints at Microsoft’s substantial in-house silicon investment and ongoing collaboration with Nvidia.
Main AI News:
In a recent announcement at the prestigious Code Conference held in Dana Point, California, Microsoft’s technology chief, Kevin Scott, shared positive insights into the company’s supply of Nvidia’s AI chips. Scott expressed that the situation has significantly improved compared to a few months ago.
The demand for Nvidia’s graphics processing units (GPUs) has been soaring, particularly since the launch of the ChatGPT chatbot, backed by Microsoft-owned OpenAI late last year. The surge in demand had initially caused a severe strain on the supply chain.
Scott stated, “Demand was far exceeding the supply of GPU capacity that the whole ecosystem could produce.” However, he went on to highlight the positive developments, saying, “That is resolving. It’s still tight, but it’s getting better every week, and we’ve got more good news ahead of us than bad on that front, which is great.“
Microsoft, like its tech industry counterparts such as Google, has been rapidly integrating generative AI into its products while also offering these capabilities to clients. The reliance on Nvidia’s GPUs for training and deploying AI models contributed to the supply scarcity issue.
Nvidia, in a recent announcement, projected a staggering 170% revenue growth in the current quarter compared to the previous year. The company’s dominance in the AI chip market has led to a substantial increase in gross margins, climbing from 44% to an impressive 70% in just one year. Notably, Nvidia’s stock price has surged by 190% in the year 2023, outperforming all other members of the S&P 500.
In a previous interview with Nilay Patel published in May, Scott discussed his challenging role in managing Microsoft’s GPU budget. He described it as “a terrible job” that had been “miserable for five years.” However, in the recent announcement, Scott expressed that the situation had improved since then.
The increased supply of Nvidia’s AI chips has made Scott’s responsibilities “less terrible.” Nvidia has also affirmed its commitment to continually increasing supply throughout the upcoming quarters.
Meanwhile, ChatGPT’s traffic has witnessed a decline for three consecutive months, according to Similarweb. Microsoft continues to provide Azure cloud-computing services to OpenAI. Additionally, Microsoft has plans to offer access to its Microsoft 365 Copilot to large organizations with subscriptions to its productivity software, starting in November.
Scott refrained from confirming media reports about Microsoft’s development of a custom AI chip but emphasized the company’s substantial investment in in-house silicon technology. Microsoft had previously collaborated with Qualcomm on an Arm-based chip for Surface PCs. Scott stated, “We’ve got a pretty substantial silicon investment that we’ve had for years, and we’ll make sure that we’re making the best choices for how we build these systems, using whatever options we have available. And the best option that’s been available during the last handful of years has been Nvidia.”
Conclusion:
The improved availability of Nvidia’s AI chips is a positive development for both Microsoft and the wider tech market. This enhanced supply will enable companies to continue integrating generative AI into their products and services, fostering innovation and growth in the AI industry. Nvidia’s robust financial performance also underscores its dominant position in the market, driving investor confidence and further solidifying its leadership.
