Jensen Huang, co-founder and CEO of Nvidia Corp., demonstrates the new Blackwell GPU chip during the Nvidia GPU Technology Conference on March 18, 2024.
David Paul Morris/Bloomberg via Getty Images
Not all chip companies are benefiting from the AI boom, earnings show, highlighting the complexity of the semiconductor supply chain and the dominance of some companies over others in different parts of the industry.
Scores of semiconductor companies reported financial results for the June quarter, some beating expectations and others disappointing, providing a glimpse into how excitement over artificial intelligence is affecting their earnings.
Current interest in artificial intelligence revolves around two key terms — large language models (LLM) and genetic artificial intelligence. LLMs require massive amounts of computing resources and data to train and support productive AI applications such as chatbots from Google and OpenAI.
LLM-educating tech giants aren’t cutting costs. After said on Wednesday that it expects a “significant” increase in capital spending in 2025 “to support our AI research and product development efforts.” Microsoft said this week its capital spending rose nearly 80% year over year to $19 billion in the June quarter.
This spending by the tech giants, as they continue to add computing resources, has been a huge boost for Nvidia because the company’s graphics processing units (GPUs) are used to train these LLMs.
But Nvidia’s rival AMD brought its own chip to market, called the MI300X AI chip, for AI purposes and is starting to see the rewards. AMD said on Tuesday it expects data center GPU revenue to top $4.5 billion in 2024, up from the $4 billion the company forecast in April. The chip company reported second-quarter earnings and revenue that beat market expectations.
Chip and gear companies also appear to be benefiting from the AI boom. TSMCthe world’s largest semiconductor maker, said last month that second-quarter net profit rose more than 36 percent year-on-year as its financial results beat market expectations.
In the meantime ASML, which makes specialized tools needed to make the world’s most advanced chips, said last month that second-quarter net bookings rose 24 percent year-over-year, underscoring demand from companies such as TSMC that make the semiconductors. Samsung said second-quarter operating profit rose 1,458.2 percent year-on-year.
However, not all semiconductor companies have been spurred by the growth in AI investment, because their exposure to the technology is now much less significant at this stage of its development.
Qualcomm and Arm saw their share price fall on Wednesday after issuing light guidance for the current quarter.
While both of these companies talk about their importance to AI applications, the reality is that their exposure to the technology is still very limited.
Arm designs the blueprints that many companies base their chips on, and Arm’s semiconductors are found in most of the world’s smartphones. While many electronics makers are talking about AI phones, that hasn’t led to fundamentally higher growth for the chip designer.
The British company still gets a large portion of its revenue from consumer electronics rather than data centers where AMD and Nvidia have found success. Analysts previously told CNBC Arm could benefit from AI when more devices start incorporating the technology.
Qualcomm’s chips appear in smartphones like those made by Samsung, and the company still makes much of its revenue from phones. Similar to Arm, Qualcomm’s silicon is not used in the types of data centers where LLM training takes place.
The company’s chips will be in Microsoft’s upcoming AI computers, but again, this is a long-term play for Qualcomm.
