The US AI sector is still chugging along, but the fear of derailment and advancements in competing AI technologies have investors seeing difficult terrain ahead.
That’s the message from Wall Street after AI chip giant Nvidia posted earnings on Feb. 26, which, while beating expectations, somehow dampened investor enthusiasm for the company.
Nvidia stocks slid on the morning of Feb. 27. Cody Acree, an analyst with Benchmark, told Yahoo Finance that Nvidia is facing a more competitive chip landscape that is changing the company’s outlook.
“Demand for their products appears to be strong, and that’s really the key for Nvidia going forward,” Acree said.
Keep rolling. Chinese technology manufacturer Huawei is one such competitor. The company is aiming to develop stronger chips faster and more efficiently, and has the powerful Chinese government backing its efforts to provide a domestic alternative to Nvidia.
Stateside, Microsoft is urging the Trump administration to relax restrictions on chip exports to countries like India, Israel, and Saudi Arabia in order to stop those nations from turning to China. But in a world where supply already doesn’t meet the demand, chip needs are likely to require some sort of accommodation to multipolar manufacturing, the company’s president Brad Smith wrote in a blog.
“The unintended consequence of this approach is to encourage Tier Two countries to look elsewhere for AI infrastructure and services,” Smith wrote. “And it’s obvious where they will be forced to turn.”
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Box it up. Meanwhile, the demand for processing power is leading some companies like Meta to invest billions in data centers. The company is researching locations for a $200 billion data center campus, according to reports, though Meta claimed that was speculation.
But reports that Meta is planning on introducing an OpenAI competitor could lend credence to the theory. And as Data Center Dynamics reported, the company is already planning a $10 billion data center in Louisiana and is building a 945-acre site in Wyoming. The news comes on the heels of Microsoft’s disinvestment in data centers that had analysts with TD Cowen speculating there might be an oversupply.
For Nvidia CEO Jensen Huang, speaking to investors during the company’s earnings call on Feb. 26, data centers are only going to continue being important—reinforcing his bullishness on the industry overall.
“We have a fairly good line of sight of the amount of capital investment that data centers are building out toward,” Huang said. “We know that going forward, the vast majority of software is going to be based on machine learning.”