Jensen Huang says even free AI chips from his competitors can't beat Nvidia's GPUs

Jensen Huang at the 2024 SIEPR Economic Summit
(Image credit: 2024 SIEPR Economic Summit on YouTube)

Nvidia CEO Jensen Huang recently took to the stage to claim that Nvidia's GPUs are "so good that even when the competitor's chips are free, it's not cheap enough." Huang further explained that Nvidia GPU pricing isn't really significant in terms of an AI data center's total cost of ownership (TCO). The impressive scale of Nvidia's achievements in powering the booming AI industry is hard to deny; the company recently became the world's third most valuable company thanks largely to its AI-accelerating GPUs, but Jensen's comments are sure to be controversial as he dismisses a whole constellation of competitors, such as AMD, Intel and a range of competitors with ASICs and other types of custom AI silicon. 

Starting at 22:32 of the YouTube recording, John Shoven, Former Trione Director of SIEPR and the Charles R. Schwab Professor Emeritus of Economics, Stanford University, asks, "You make completely state-of-the-art chips. Is it possible that you'll face competition that claims to be good enough – not as good as Nvidia – but good enough and much cheaper? Is that a threat?"

Jensen Huang begins his response by unpacking his tiny violin. "We have more competition than anyone on the planet," claimed the CEO. He told Shoven that even Nvidia's customers are its competitors, in some cases. Also, Huang pointed out that Nvidia actively helps customers who are designing alternative AI processors and goes as far as revealing to them what upcoming Nvidia chips are on the roadmap.

This does indeed sound like quite an extraordinary way of doing business, but Huang's next claim that Nvidia operates as a "completely open book" while working with almost everyone else in the industry may be harder to believe. Remember, there were strong accusations of Nvidia operating a GPU Cartel just recently, with customers reportedly scared to speak to rival GPU / AI accelerator makers for fear of delayed orders. An industry consortium has also formed in an attempt to unseat the company's dominant CUDA programming model. 

Returning to the Stanford interview, Jensen Huang outlined Nvidia's currently unassailable unique selling points. The Nvidia CEO said that whereas you could build a chip to be good at one particular algorithm, Nvidia's GPUs are programmable. Moreover, the Nvidia platform is "a great standard… in every single cloud computer company." A typical data center that wants to support a wide range of customers, from financial services to manufacturing and so on, will therefore be drawn towards Nvidia hardware.  

Free isn't cheap enough to compete with Nvidia

Huang also sought to provide a contrast that might be counterintuitive to those focused on GPU prices: people who buy and sell chips think about the price of chips, and people who operate data centers think about the cost of operations, he clarified.

Of course, companies will be well aware of the Total Cost of Ownership (TCO), which basically means that Nvidia's claimed benefits like time to deployment, performance, utilization, and flexibility are "so good that even when the competitor's chips are free, it's not cheap enough," according to Huang. 

Concluding his answer to Shoven, the Nvidia CEO underlined that keeping this far ahead, with this unbeatable TCO, is Nvidia's goal. Huang reminded summit attendees that what Nvidia does takes a lot of hard work and innovation — no luck involved here — and nothing is taken for granted.

Naturally, Nvidia's competitors would beg to differ with Huang's statements, but the incumbent is the unquestioned 800lb gorilla of the AI world right now, placing the onus on its competitors to prove Jensen's statements wrong. 

Mark Tyson
News Editor

Mark Tyson is a news editor at Tom's Hardware. He enjoys covering the full breadth of PC tech; from business and semiconductor design to products approaching the edge of reason.

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  • CmdrShepard
    Jensen Huang has always been a veshenaan.
    Reply
  • hotaru251
    too bad companies favor profit over respect else they'd all refuse to buy nvidia for being talked down to by their CEO.
    Reply
  • Alvar "Miles" Udell
    The bigger they are, the harder they fall, though nVidia's P/E is only 77, while AMD's is 403, so the market has huge expectations from AMD, they're the ones that need to deliver, and that's going to need to start with aggressive pricing, something AMD has essentially abandoned.
    Reply
  • atomicWAR
    To Jensen I say...

    I look forward to the day someone knocks Jensen off his high horse. We need competition and his antics only prove as much.
    Reply
  • DavidLejdar
    As it is, he sure may have a point. But then again, with all that hype and market movements etc., already tomorrow several corporations may announce a syndicate to accumulate as many shares as possible of TSMC. And then they might want to use production capacity in the near future for themselves mostly. Which would mean for Nvidia, that they would have a real production issue quite quickly, while getting their own fab up and running may easily take years. And with barely any revenue in sight, Nvidia's share price may drop so quickly, that someone else may consider incorporating them.

    I mean, not saying that it will sure be at least as exciting. After all, the large tech investors seem to prefer companies, which don't have capital tied up in material assets. Just saying that it might not be all a smooth sail for years to come.
    Reply
  • bit_user
    Alvar Miles Udell said:
    The bigger they are, the harder they fall, though nVidia's P/E is only 77, while AMD's is 403,
    I was going to comment on Jensen feeling the need to try and justify Nvidia's P/E, but... yikes!

    Alvar Miles Udell said:
    so the market has huge expectations from AMD, they're the ones that need to deliver, and that's going to need to start with aggressive pricing, something AMD has essentially abandoned.
    Um, you know the "E" stands for Earnings, right? The only way to boost earnings by price-reductions is if you think you can drive enough additional volume to make up for the reduced margins. I see neither adequate pent-up demand, nor enough price sensitivity to expect the market would be very responsive to further price-cutting.

    AMD needs to do more to swing their P/E than that. The main thing would be acquisitions. That would potentially let them trade some of that share price for additional revenue streams, so long as it's an established company that doesn't overlap much with their existing portfolio. Of course, acquisitions take time and are limited by a company's internal resources. So, you can only turn that crank so fast. Plus, the revenue doesn't get recognized as yours until the acquisition formally completes, which can take a couple years (or longer, if regulatory approval gets drawn out).
    Reply
  • ekio
    Why are you making an article every time this guy speaks?
    The last time he said something that was:
    Kids, stop learning coding because my expensive gpus can do it for you (using human code as a source).
    He will say anything that serves himself.
    Reply
  • Nyara
    ekio said:
    Why are you making an article every time this guy speaks?
    The last time he said something that was:
    Kids, stop learning coding because my expensive gpus can do it for you (using human code as a source).
    He will say anything that serves himself.
    Nvidia (inflated bubbled up) stock market cap makes everything he says have a couple of hundred billion dollars domino effect, specially relevant as Nvidia alone accounts for most of the GDP growth in US for the last few quarters. We live in a sad world.
    Reply
  • craigss
    Once CUDA is taken out of the equation then AMD has the better solution, its quicker and uses less power, Nvidia has been very clever in initially making software thats propriety which then fans the flames of demand, its the oldest trick in the book create the need then supply that need, CUDA is the key once thats sidelined Nvidia will crash
    Reply
  • bit_user
    Nyara said:
    Nvidia alone accounts for most of the GDP growth in US for the last few quarters.
    Source?
    Reply