Nvidia's Key Rivals: Advanced Micro Devices and Cerebras Systems

In the competitive world of semiconductor manufacturing, two companies are emerging as significant challengers to Nvidia's dominance in the chip industry: Advanced Micro Devices and Cerebras Systems.

For the past couple of years, the term "artificial intelligence (AI)" has frequently appeared in financial discussions. Its impact is immense, and it seems to be a substantial part of current and future technology conversations.

Among the leading companies in the AI space is Nvidia (NVDA). Over the last two years, Nvidia's stock price skyrocketed nearly 900%, making it one of the most valuable companies in the world. Much of this growth is attributed to its compute and networking division, which includes its powerful graphics processing units (GPUs) and data center services.

Nvidia currently commands about 88% of the total market for GPUs. This raises the question: can it be challenged by other companies in the chip market? Let's examine the two rivals that are viewed as the most serious threats to Nvidia's position.

1. Advanced Micro Devices

Nvidia's most immediate competitor is Advanced Micro Devices (AMD). Much like Nvidia, AMD has a developing GPU and data center segment that has benefited from the AI trend in recent years.

AMD's recent earnings report was impressive, showcasing an 18% year-over-year revenue increase to $6.8 billion. Additionally, adjusted gross and operating profits rose by 23% and 34% year over year, respectively.

In the past few years, AMD has actively acquired smaller AI-related companies. Though the results of these acquisitions may take time, there is optimism about AMD's potential to enhance sales and margins as it integrates these new products into its AI framework.

However, taking a closer look at the figures reveals a different story. Nvidia is significantly larger than AMD, with $30 billion in revenue and $13.5 billion in free cash flow in its most recent quarter. This stark contrast illustrates that Nvidia not only operates on a much larger scale but is also growing at a faster pace.

Nvidia has successfully reinvested its substantial profits into research and development, working on new product initiatives like the next-generation Blackwell GPUs, which are already in high demand. In comparison, AMD's outlook appears less promising.

While AMD is likely to continue benefiting from the growing generative AI sector, the chances of it surpassing Nvidia are slim.

2. Cerebras Systems

The second company seen as a notable competitor to Nvidia is Cerebras Systems. Many may not be familiar with Cerebras due to its status as a privately held company, but it is preparing for an initial public offering (IPO).

Cerebras specializes in a different kind of chip architecture known as the wafer-scale engine (WSE). Essentially, a WSE is a far larger chip than Nvidia's compact GPUs. According to Cerebras' filings, these larger chips offer greater compute power, memory, and bandwidth than traditional GPU designs.

However, like AMD, Cerebras is much smaller compared to Nvidia. In 2023, Cerebras reported revenue of $78.7 million, a remarkable 220% year-over-year increase. Furthermore, the company earned $136 million in sales in the first half of 2024.

This impressive growth rate is overshadowed by the fact that roughly 90% of Cerebras' revenue comes from a single customer. This level of dependence raises concerns about the company's sustainability and market adoption of its innovative chip designs.

While it's likely that more businesses will eventually explore new chip architecture as technology infrastructure investments rise, it's improbable that customers will quickly abandon Nvidia's established solutions for this newer, experimental approach.

Though Cerebras shows promise, Nvidia's substantial market presence doesn't present a significant threat in the near term.

Overall, both Advanced Micro Devices and Cerebras Systems are noteworthy competitors in the semiconductor industry, but they face considerable challenges in rivaling Nvidia's established dominance and market scale.

Nvidia, AMD, Cerebras