Nvidia struggles with fab capacity and China sales despite a blowout quarter

Monolithic dies are single, large pieces of silicon containing an entire chip’s circuitry, while chiplets are smaller, modular pieces of silicon combined to form a complete chip, offering greater flexibility and potentially lower costs.

“AMD is capitalizing on Nvidia’s limited capacity,” Sag said.

Reliance on manufacturing partners

Like many companies that design chips and do not manufacture them, Nvidia relies on Taiwan Semiconductor (TSMC) as a production partner, specifically for its latest 3nm process node.

TSMC is currently racing to build out increased capacity for this process node with additional factories planned for Japan.   

At the recent APEC summit in San Fransisco, Morris Chang, TSMC’s founder, met with Japanese Prime Minister Fumio Kishida to discuss enhancing their semiconductor partnership.

Local media in Taiwan report that TSMC already has a high demand for availability on its 3nm process node, driven by high demand from major tech companies for advanced AI chips and new iPhones.

Financial analysts say that the relatively high cost of using the node is expected to boost TSMC’s revenue growth significantly. 

GPUs and AI everywhere

The AI revolution is generally putting intense pressure on chip designers as well as chip makers to pump out more processors to meet demand, but it is also having downstream effects.

Nvidia recently announced that its new AI-ready ethernet protocol, Spectrum-X, is available from major server manufacturers.

Spectrum-X is essential for “successfully deploying Generative AI workloads is the infrastructure and networking capabilities needed to support them,” according to Deepika Giri, one of IDC’s lead analysts in Asia.

There’s also a geopolitical element. Countries are building up sovereign AI infrastructure “to support economic growth and industrial innovation,” as Kress said in the earnings call, not wanting to cede this ability to foreign governments, which in turn boosts demand for GPUs. “Market dynamics are expected to become more interesting next year, with constraints still present; however, both Nvidia and AMD should perform well despite China’s restrictions, as other countries outside the US also invest in AI and require GPUs,” Sag said.