Nvidia knows its customers are desperate to get their hands on its GPUs, and the company is using that to its advantage.
Though demand for Nvidia's GPUs — the all-powerful chips fueling artificial intelligence — is still high, the greatest existential threat to the company is if demand slows down. So, to keep itself at the top of the game, Nvidia has diversified its business into the world of cloud service software and rentals, The Information reported.
Last year, Nvidia started its cloud service, DGX Cloud, a competitor to some of Nvidia's own customers, including Microsoft and Amazon Web Services. DGX Cloud rents Nvidia-powered servers from within AWS' data centers and then, promising greater computing capability, leases them back to Nvidia's customers, The Information reported.
An Amazon spokesperson told The Information the suggestion that AWS was concerned about upsetting Nvidia was "speculative and incorrect."
When contacted by Business Insider, the spokesperson disputed The Information's report and said Amazon worked closely with Nvidia to develop features in the DGX Cloud offering that gave customers "the best of both companies."
"We worked closely with Nvidia to develop a DGX offering that brings customers the best of both companies, and we invested the time and resources needed to ensure that our offering met the incredibly high bar that our customers expect of us," an Amazon spokesperson told Business Insider in a statement.
"We wanted to engineer an offering that would bring together Nvidia's cutting-edge Blackwell GPU technology with AWS technologies, like EFA for better scale networking and Nitro for more secure and better performing virtualization, because we believe these compelling capabilities will resonate with customers—and that is what DGX Cloud on AWS will deliver," the statement continued. "It's another great example of two close partners working together to engineer the best place to run GPUs in the cloud."
Through DGX Cloud, Nvidia has creatively maneuvered itself into a position where its own customers are helping it compete with them. But CEO Jensen Huang's aggressive strategy to maintain dominance doesn't stop there, The Information reported. Nvidia is also requiring customers to build out more space to house the GPUs they buy — and telling them how to do it.
"Nvidia will not ship GPUs unless the customer can certify that they have data-center capacity in which to place those GPUs," Raul Martynek, who works with cloud providers as the CEO of DataBank, told The Information.
The outlet reported that the titan chipmaker, in addition to demanding its clients provide proof of their expanded data-center capacity, was also telling customers how to design the racks that hold the servers and GPUs within those data centers.
And because the racks are specifically designed to fit Nvidia chips, it could make it difficult for the customer to switch to chips from competing companies without incurring tremendous costs.
For now, Nvidia and its clients such as Amazon have agreed to continue their somewhat symbiotic relationship, but that hasn't stopped competition from brewing on both sides. While Nvidia has expanded into cloud services, AWS is also developing its own AI chips, named Trainium and Inferentia, which aim to compete with Nvidia's.
Though its current strategy is clever enough to have propelled Nvidia to become the world's most valuable company, the company's quest for industry dominance could come back to bite it. Politico reported earlier this month that the Department of Justice was looking to launch an investigation into potential antitrust violations.
The report said the DOJ was preparing to investigate whether Nvidia came to become the leading supplier of high-end semiconductors through anticompetitive behavior.
A spokesperson for Nvidia declined to comment when reached by BI.
Update June 20, 2024: This story has been updated with additional clarification and comment from Amazon.
