Nvidia and AMD: The Battle for GPU Dominance in 2023

When discussing semiconductor stocks, names like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) often come to mind. Both firms are known for designing advanced chips, specifically graphics processing units (GPUs), crucial for training generative AI models and enabling machine learning.

Over the last two years, Nvidia has firmly established itself as the leader in the chip market, boasting a wide range of GPUs compared to AMD. However, there lies a lesser-known aspect of Nvidia’s computing and networking business that has helped it maintain a top spot in the data center GPU market.

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In the paragraphs below, we will explore what makes Nvidia a formidable player, discuss AMD’s strategic moves to enhance its competitive positioning, and reveal Nvidia’s latest set of responses.

Nvidia’s Secret Weapon in the GPU Market

Data center GPUs continuously perform complex computations. But how do these chips operate, and what powers them? The key lies in Nvidia’s compute unified device architecture (CUDA), a software platform that enhances its GPUs’ capabilities. While Nvidia’s chips can function on other platforms, developers face limitations without CUDA. This makes using CUDA along with Nvidia GPUs the optimal choice for maximizing their extensive features.

By integrating hardware and software into a cohesive system, Nvidia has captured a remarkable 90% share of the data center GPU market. Yet, AMD is gearing up to challenge that lead with a promising strategy that could stimulate its growth.

Image source: Getty Images.

AMD Looks to Gain Ground

Despite Nvidia’s significant lead, signs indicate that its grip on market dominance may be weakening. Recent articles highlight a slowdown in Nvidia’s data center GPU sales, while AMD’s GPU segment has expanded significantly, growing at a similar pace to its rival’s operations.

AMD’s recent surge can be attributed to the successful introduction of its MI300X accelerators, now utilized by major clients, including Microsoft, Oracle, and Meta Platforms. Although these tech giants traditionally rely on Nvidia, they are diversifying their GPU choices and exploring AMD’s more cost-effective options.

Additionally, AMD offers a software platform called ROCm. Although CUDA remains more prevalent than ROCm, differing trends in data center operations suggest ROCm might experience significant growth as AMD works to capture additional market share in the GPU sector.

Nvidia’s Strategic Acquisition

AMD’s swift growth in the data center GPU market has not gone unnoticed. In late December, Nvidia announced its acquisition of Run:ai, a startup based in Israel, for $700 million. Run:ai focuses on efficient cluster resource utilization for AI workloads.

This acquisition represents a strategic move, highlighting Nvidia’s commitment to providing an integrated ecosystem for users of its AI platforms. The deal makes it even more challenging for customers to switch to alternatives such as AMD’s ROCm.

Although AMD is making strategic advances, I believe ROCm is not a decisive threat to Nvidia’s position. Currently, Nvidia’s status as the dominant player in the GPU market appears secure.

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Randi Zuckerberg, a former director of market development at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Adam Spatacco holds shares in Meta Platforms, Microsoft, and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Oracle, and it also recommends going long on January 2026 $395 calls on Microsoft and shorting January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.