microsoft leads ai race with massive nvidia chip purchase
Silicon Valley, Thursday, 19 December 2024.
Microsoft has made a bold move in the AI sector by purchasing 485,000 Nvidia Hopper chips in 2024. This acquisition more than doubles the number of chips bought by its biggest competitors, including Meta and Amazon. The purchase aligns with Microsoft’s aggressive AI strategy, which includes a $31 billion investment in AI this year. The tech giant’s commitment is further evidenced by its custom AI chip, Maia, and long-term power agreements to support its data centers. By securing such a significant inventory of Nvidia chips, Microsoft positions itself ahead in the AI infrastructure race. This strategic decision highlights the increasing demand for specialized AI hardware as companies push to enhance their computational capabilities. The substantial investment underscores Microsoft’s aim to dominate the AI landscape, reflecting a broader industry trend towards self-reliance and innovation in AI technologies.
Market dominance through strategic procurement
Microsoft’s acquisition of 485,000 Nvidia Hopper chips in 2024 vastly outpaces its competitors, with Meta securing 224,000 chips and Amazon acquiring 196,000 [1][3]. This procurement represents a tripling of Microsoft’s GPU acquisition compared to 2023 [3]. The significant investment aligns with Microsoft’s broader AI strategy, including its $13 billion commitment to OpenAI [3]. NVIDIA’s market position remains strong, with its GPUs accounting for 43% of server spending in 2024 [3].
Stock market implications
The partnership’s impact on both companies’ market valuations is substantial. Nvidia currently holds a market capitalization of $3.3 trillion, while Microsoft maintains a similar valuation [5]. According to Dan Ives of Wedbush Securities, both companies are projected to reach the $4 trillion market cap milestone by 2025 [5]. Microsoft’s cloud segment demonstrates strong growth, with Azure revenue increasing by 33%, where AI services contributed 12 percentage points [5].
Infrastructure and innovation
Microsoft is strengthening its AI infrastructure beyond chip procurement. The company is deploying its custom-designed Maia chips alongside Nvidia’s Hopper processors [3][6]. To support its expanding data center operations, Microsoft has secured long-term power arrangements, including a 20-year agreement with the Three Mile Island nuclear plant [6]. This comprehensive approach demonstrates Microsoft’s commitment to building robust AI computing capabilities [6].