Ai Chips: The Invisible Engine Fueling The Ai Revolution

2024 is the year of Artificial intelligence. The year has marked the invention and introduction of several groundbreaking technologies in AI arena. But the true engine propelling this revolution is the AI chips.

Fuelled by the spike in AI industry, the demand for Ai chips is also rising.

The high demand is reshaping the semiconductor landscape and is propelling established companies to new heights. AI chips are employed in every sector. From healthcare to automation, to automobiles to manufacturing, to making gaming consoles to powering your latest graphic card, Ai chips are the invisible engines that drive advancement across ever sector.

This article is aimed at in-depth view of how AI chips and their demand is benefitting the overall industry. The article also talks about the influence of AI chips in narrating the geopolitical scenario around the world.

The Role of AI Chips in Booming AI sector:

The demand for AI chips is skyrocketing. Market analysts predict that the AI chip market is projected to grow exponentially. Its market size will increase to $82.96 Billion by 2027, with an annual growth rate of 34.1%.

As a result, the entire AI industry will swell to $909 Billion by end of this decade with Compound Annual Growth Rate (CAGR) of 35% between 2022 and 2030.

The compounding impact of this demand is evident through the net revenue of leading AI chip manufacturers- such as Broadcom, Nvidia, and Intel.

Broadcom, a major player in the booming AI chip market, had anticipated $10 billion in AI chip sales for 2024, but has already anticipated $11 Billion in chip sales so far.

Broadcom’s AI related revenue quadrupled to $2.3 billion in the first quarter of 2024 (image).The positive revenue trajectory is fueled by custom AI chips designed for ‘hyperscaler’ clients- like Google and Meta. 

Nvidia, another titan in the industry, also continues to dominate the market with its powerful GPU- H100 and A100. These processors are backbone of data processing. 

Similarly Intel, the traditional CPU powerhouse, is now migrating towards AI chip architecture – with the aim to take a slice of the swelling market. 

The swelling revenue streams allow companies to reinvest heavily in the research and development. This fuels creation of even more powerful and specialized AI chips. 

The Benefits for the Chip Manufacturers:

With the rise in the demand of AI chips, AI chip manufacturers are growing leaps and bounds, not just in terms of revenue growth and profits, but also in terms of technological advancements and market size. 

The most immediate and measurable impact is the significant increase in revenue. As industries clamor for AI capabilities, chip manufacturers and sellers are experiencing a substantial boost in their sales. Increased sales are also translating to higher profits. There is a high profit margin for AI Chips due to extensive research involved in their development. So, the profitability and financial health of company improves, allowing them to further invest back in the business. 

But, it is not just about numbers. The rise in chip demand also creates a fertile ground for manufacturers to influence and strengthen their market position, negotiate better terms with customers and also innovate and research more in the domain. 

The Economic and Geopolitical Influence:

The AI chips also influence the economic and geopolitical situation around the world. The concentrated nature of the AI chip production, dominated by East Asia, creates vulnerabilities. Its prime example is COVID-19 Pandemic. The demand for AI chips increased due to increased application in healthcare research, drug discovery, diagnostics and medical treatments. The sudden surge highlighted the existing vulnerabilities and put a strain on the global supply chain of AI chips. This exposed the immediate requirement to upscale AI chip manufacturing technology. 

The AI chip boom also plays a role in the complex geopolitical landscape. The US is the leader in chip designing, while China is chip manufacturing powerhouse. US benefits from the intellectual property of the AI chips; while Chinese economy benefit from the manufacturing jobs and revenue generated by producing these chips. This interdependence makes AI chips as critical link between economies. In fact, countries are seeing advancements in AI technologies as a matter of national security. Nations are investing in AI technologies to develop autonomous weapon systems and advanced surveillance technologies. 

This makes AI chips as a secret weapon, which can be used to sabotage almost all sectors of a nation. 

A Look Ahead:

Interestingly, the more Ai chips are supplied, the more demand is created in the market. The surging demand means higher revenue generation for more R&D, leading to better AI chips. This, in turn, further fuels the demand for Ai applications, which feeds back to the initial demand cycle. 

This self-fulfilling of AI chip innovation is snowballing the demand of AI chips and is a latent transformative force- not just in the semiconductor industry, but in all the sectors.