Google CEO Sundar Pichai talks about the company’s third-generation artificial intelligence chips.
Source: YouTube screenshot
Not content with relying on standard chips that are in high demand, some of the world’s biggest tech firms are developing their own semiconductors.
Apple, Amazon, Facebook, Tesla and Baidu are all shunning established chip firms and bringing certain aspects of chip development in-house, according to company announcements and media reports.
“Increasingly, these companies want custom-made chips fitting their applications’ specific requirements rather than use the same generic chips as their competitors,” Syed Alam, global semiconductor lead at Accenture, told CNBC.
“This gives them more control over the integration of software and hardware while differentiating them from their competition,” Alam added.
Russ Shaw, a former non-executive director at U.K.-based Dialog Semiconductor, told CNBC that custom-designed chips can perform better and work out cheaper.
“These specifically designed chips can help to reduce energy consumption for devices and products from the specific tech company, whether it relates to smartphones or cloud services,” Shaw said.
The ongoing global chip shortage is another reason why big tech firms are thinking twice about where they get their chips from, Glenn O’Donnell, research director at analyst firm Forrester, told CNBC. “The pandemic threw a big wrench in these supply chains, which accelerated efforts to do their own chips.”
“Many already felt limited in their innovation pace being locked into chipmaker timelines,” O’Donnell said.
A.I. chips and more
At present, barely a month goes by without a Big Tech company announcing a new chip project.
Perhaps the most notable example came in November 2020 when Apple announced it was moving away from Intel’s x86 architecture to make its own M1 processor, which now sits in its new iMacs and iPads.
More recently, Tesla announced that it is building a “Dojo” chip to train artificial intelligence networks in data centers. The automaker in 2019 started producing cars with its custom AI chips that help on-board software make decisions in response to what’s happening on the road.
Baidu last month launched an AI chip that’s designed to help devices process huge amounts of data and boost computing power. Baidu said the “Kunlun 2” chip can be used in areas such as autonomous driving and that it has entered mass production.
Some of the tech giants have chosen to keep certain semiconductor projects under wraps.
Google is reportedly edging closer to rolling out its own central processing units, or CPUs, for its Chromebook laptops. The search giant plans to use its CPUs in Chromebooks and tablets that run on the company’s Chrome operating system from around 2023, according to a report from Nikkei Asia on Sep. 1. Google did not immediately respond to a CNBC request for comment.
Amazon, which operates the world’s largest cloud service, is developing its own networking chip to power hardware switches that move data around networks. If it works, it would reduce Amazon’s reliance on Broadcom. Amazon, which already designs a number of other chips, did not immediately respond to a CNBC request for comment.
Facebook’s chief AI scientist told Bloomberg in 2019 that the company is working on a new class of semiconductor that would work “very differently” than most of the existing designs. Facebook did not immediately respond to a CNBC request for comment.
Designing but not manufacturing
At this stage, none of the tech giants are looking to do all the chip development themselves.
“It is all about the design and performance of the chip,” Shaw said. “At this stage, it is not about the manufacturing and foundries, which is very costly.”
Setting up an advanced chip factory, or foundry, like TSMC‘s in Taiwan, costs around $10 billion and takes several years.
“Even Google and Apple are reticent to build these,” O’Donnell said. “They’ll go to TSMC or even Intel to build their chips.”
O’Donnell said there’s a shortage of people in Silicon Valley with the skills required to design high end-processors. “Silicon Valley put so much emphasis on software over the past few decades that hardware engineering was seen as a bit of an anachronism,” he said.
“It became ‘uncool’ to do hardware,” O’Donnell said. “Despite its name, Silicon Valley now employs relatively few real silicon engineers.”
Bluesky has surged in popularity since the presidential election earlier this month, suddenly becoming a competitor to Elon Musk’s X and Meta’s Threads. But CEO Jay Graber has some cautionary words for potential acquirers: Bluesky is “billionaire proof.”
In an interview on Thursday with CNBC’s “Money Movers,” Graber said Bluesky’s open design is intended to give users the option of leaving the service with all of their followers, which could thwart potential acquisition efforts.
“The billionaire proof is in the way everything is designed, and so if someone bought or if the Bluesky company went down, everything is open source,” Graber said. “What happened to Twitter couldn’t happen to us in the same ways, because you would always have the option to immediately move without having to start over.”
Graber was referring to the way millions of users left Twitter, now X, after Musk purchased the company in 2022. Bluesky now has over 21 million users, still dwarfed by X and Threads, which Facebook’s parent debuted in July 2023.
X and Meta didn’t immediately respond to requests for comment.
Threads has roughly 275 million monthly users, Meta CEO Mark Zuckerberg said in October. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates 318 million monthly users as of October.
Bluesky was created in 2019 as an internal Twitter project during Jack Dorsey’s second stint as CEO, and became an independent public benefit corporation in 2022. In May of this year, Dorsey said he is no longer a member of Bluesky’s board.
“In 2019, Jack had a vision for something better for social media, and so that’s why he chose me to build this, and we’re really thankful for him for setting this up, and we’ve continued to carry this out,” said Graber, who previously founded Happening, a social network focused on events. “We’re building an open-source social network that anyone can take into their own hands and build on, and it’s something that is radically different from anything that’s been done in social media before. Nobody’s been this open, this transparent and put this much control in the users hands.”
Part of Bluesky’s business plan involves offering subscriptions that would let users access special features, Graber noted. She also said that Bluesky will add more services for third-party coders as part of the startup’s “developer ecosystem.”
Graber said Bluesky has ruled out the possibility of letting advertisers send algorithmically recommended ads to users.
“There’s a lot on the road map, and I’ll tell you what we’re not going to do for monetization,” Graber said. “We’re not going to build an algorithm that just shoves ads at you, locking users in. That’s not our model.”
Bluesky has previously experienced major growth spurts. In September, it added 2 million users following X’s suspension in Brazil over content moderation policy violations in the country and related legal matters.
In October, Bluesky announced that it raised $15 million in a funding round led by Blockchain Capital. The company has raised a total of $36 million, according to Pitchbook.
Alphabet shares slid 6% Thursday, following news that the Department of Justice is calling for Google to divest its Chrome browser to put an end to its search monopoly.
The proposed break-up would, according to the DOJ in its Wednesday filing, “permanently stop Google’s control of this critical search access point and allow rival search engines the ability to access the browser that for many users is a gateway to the internet.”
This development is the latest in a years-long, bipartisan antitrust case that found in an August ruling that the search giant held an illegal monopoly in both search and text advertising, violating Section 2 of the Sherman Act.
The potential break-up would include preventing Google from entering into exclusionary agreements with competitors like Apple and Samsung, part of a set of remedies that would last 10 years.
POLAND – 2024/11/13: In this photo illustration, the NVIDIA company logo is seen displayed on a smartphone screen. (Photo Illustration by Piotr Swat/SOPA Images/LightRocket via Getty Images)
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Nvidia shares dropped in U.S. premarket trading Thursday after the tech giant’s third-quarter earnings failed to impress investors.
Shares of the chipmaker slumped 3.21% at around 5:03 a.m. ET, following the Wednesday release of Nvidia’s quarterly results, which beat on both the top and bottom lines.
Revenue came in at $35.08 billion, up 94% year-on-year and exceeding the $33.16 billion forecast by LSEG analysts. Earnings per share was 81 cents adjusted, also above analyst expectations.
Other chipmakers fell on the back of the market reaction to Nvidia’s third-quarter results. Shares of Intel, Qualcomm and Micron Technology all lost 1% or more in value, while AMD declined 0.6%.
The slump in Nvidia also had a knock-on effect on European semiconductor firms. ASML, a key chip equipment supplier, dropped 0.9%, while compatriot Dutch chip firm ASMI fell 0.5%. Chipmakers BE Semiconductor, STMicroelectronics and Infineon slipped 0.8%, 0.7 and 0.6%, respectively.
Several notable chip names were also in negative territory in Asia. TSMC, which makes Nvidia’s high-performance graphics processing units, eased as much as 1.5%. Contract electronics manufacturer Foxconn dropped 1.9%.
Why are Nvidia shares falling?
Nvidia has largely cornered the market for the high-powered chips powering the world’s most advanced artificial intelligence models, such as OpenAI’s ChatGPT.
Despite nearly doubling sales year-on-year, Nvidia’s third-quarter results showed a slowdown from previous quarters. Nvidia previously reported growth of 122% in the second quarter, 262% in the first quarter, and 265% in the fourth quarter of 2023.
Derren Nathan, head of equity research at Hargreaves Lansdown, said in emailed comments Wednesday that the dip in Nvidia’s share price “suggests even outstanding isn’t enough for some investors,” adding that he expects the stock to bounce back once markets open.
“NVIDIA’s generated stellar gains for shareholders over many years now, and right now it’s pretty hard to see any major holes in the investment case,” Nathan added.
Analysts are looking ahead to the much-anticipated launch of Nvidia’s next-generation chip called Blackwell. On the firm’s earnings call, CEO Jensen Huang said that demand for the chip is exceeding supply.
