Nations building artificial intelligence (AI) models in their native languages are increasingly turning to Nvidia (NVDA.O) for its advanced chips, significantly boosting demand as generative AI gains prominence in both business and government sectors.
Although Nvidia’s third-quarter sales forecast for its AI-focused chips, which power technologies like OpenAI’s ChatGPT, fell short of some investors’ high expectations, the company noted a surge in new customers worldwide. Governments, in particular, are seeking to develop their own AI models and require the necessary hardware to support these initiatives.
According to Nvidia’s Chief Financial Officer Colette Kress, countries creating their own AI applications and models are expected to contribute low double-digit billions to Nvidia’s revenue in the fiscal year ending January 2025, an increase from previous estimates of high single-digit billions. Nvidia has projected about $32.5 billion in total revenue for the third quarter ending in October.
“Countries around the world want their own generative AI that can integrate their language, culture, and local data,” Kress stated, emphasizing the importance of AI expertise and infrastructure as “national imperatives.” She highlighted Japan’s National Institute of Advanced Industrial Science and Technology as an example, which is developing an AI supercomputer using thousands of Nvidia H200 graphics processors.
Governments are also leveraging AI to bolster national security. IDC computing semiconductors analyst Shane Rau noted that “AI models are trained on data, and for nations, their data is confidential. Therefore, they need custom AI models and tailored hardware and software configurations.”
In 2023, Washington tightened restrictions on exporting advanced chips to China to prevent AI advancements that could benefit China’s military, affecting Nvidia’s sales in the region. Meanwhile, businesses are seizing opportunities to support government efforts in creating AI platforms in regional languages. For instance, IBM (IBM.N) announced in May that Saudi Arabia’s Data and Artificial Intelligence Authority would use its AI platform Watsonx to train its “ALLaM” Arabic language model.
According to Bob O’Donnell, chief analyst at TECHnalysis Research, nations developing their own AI models present growth opportunities for Nvidia’s GPUs, alongside the substantial investments from major cloud providers like Microsoft (MSFT.O).
