AI chip war intensifies as Google and Amazon challenge Nvidia’s dominance

The battle for AI chips is heating up. After Nvidia takes a clear lead in the AI chip space, now Google and Amazon are taking the race to a new level. The last week of November saw the competition between Nvidia and Google intensify as reports suggested that Google had started pitching its AI Tensor Processing Units (TPUs) to major companies, including Meta and major financial institutions. These are positioned as alternatives to Nvidia’s GPUs.

It came after Salesforce’s CEO, Marc Benioff, heaped praises on Google’s Gemini 3AI model. Most importantly, Google’s TPUs are found to be cheaper for clients in the execution of several tasks. Analysts say that Google’s TPUs cost between one-half one one-tenth compared to comparable Nvidia chips. This is a significant development.

So far, Nvidia’s GPUs have been the dominant chips for powering complex AI operations. Now, Google has entered the ring with similar performance chips, which cost less than Nvidia’s. But this is not the end of the story.

Now, Amazon has entered the fray. This week, Amazon's cloud unit raced to get the latest version of its AI chip to market. Trainium chips are capable of powering the intensive calculations behind AI models more cheaply and efficiently than Nvidia’s GPUs, claimed the company. So, the AI chip race is intensifying with all major players entering the race. It will not be surprising if other major tech giants come up with their own chips next year.

Notably, AI-powered chips sit at the centre of the current AI wave. Owning this critical piece of hardware is important to stay ahead in the current race. That is the reason that many companies are coming up with their own AI-powered chips. What does it signify for the market? Such a race is considered healthy for the end users.

As seen in the case of Google’s TPUs, prices are way lower than Nvidia chips. As more players enter the chip race, prices are likely to dive further. In general, this brings good news for enterprises. Currently, many startups complain that they are not able to afford costly Nvidia GPUs because of limited resources.

So, as the costs of chips come down, more enterprises will be able to use them. As a result, innovations in the AI space are likely to accelerate further.

Moreover, more players will help in expanding the market with faster adoption of AI across the board. However, these developments may not have a beneficial impact on investors. And billions of dollars have been pumped into AI companies.

Most technology giants are hovering around record-high levels in the US market. The US economy is betting big on AI-powered growth in the coming years.

But when more players enter the fray, they tend to reduce the pricing power of incumbents. That has already happened in the case of Google TPUs.

The immediate outcome of such price reduction is that the time period required to get back the invested capital or return on capital is going to be elongated. All-in-all, the global AI space is in for interesting times.