Artificial intelligence has been a defining technology over the past few years, as it enables more business possibilities and pushes the boundaries of efficiency. This technology helps workers increase their productivity and allows corporations to offer better products. Artificial intelligence also enables personalized customer experiences on a scale that can translate into higher revenue and earnings.
Tech giants such as Nvidia Corp. (ticker: NVDA) and Microsoft Corp. (MSFT) have been rushing to claim their share of the burgeoning artificial intelligence industry. The opportunity is vast, as the AI market is projected to maintain a compound annual growth rate of 36.6% from now until 2030, according to Grand View Research.
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Although tech corporations are competing against each other, these same companies often work together along the way. Collaborations are common in artificial intelligence, and these are some of the top AI alliances in the latest tech race:
— OpenAI partnerships.
— Nvidia and its frenemies.
— Tech giants teaming up with Arm.
OpenAI Partnerships
Large language model ChatGPT’s creator, OpenAI, has several partners, but few of them are as significant as Microsoft and Apple Inc. (AAPL
). Microsoft invested $13 billion into OpenAI and almost hired the company’s CEO, Sam Altman, after OpenAI initially removed him. The company quickly switched course, and Altman remains as OpenAI’s CEO.
Apple is another big OpenAI partner. The iPhone, iPad and Mac maker will use OpenAI’s technology in its future devices, which will help make the technology more mainstream.
However, OpenAI can face issues with expanding its Big Tech partnerships. Microsoft and Apple recently abandoned their OpenAI board seats amid regulatory scrutiny. The leading tech companies may stand pat, but they could also pull back from their OpenAI involvement to avoid falling on the wrong side of antitrust laws.
Nvidia and Its Frenemies
Nvidia has taken the global spotlight as the leading AI chip provider. While other companies also produce chips that can handle the computational workload of AI tools, Nvidia is in a class of its own. AI chips are the bedrock for AI innovations, and Nvidia’s distinct advantage has led to many partnerships.
Nvidia joined forces with Google parent Alphabet Inc. (GOOG, GOOGL), so Google Cloud customers can easily scale generative AI applications. Meta Platforms Inc. (META) has been another significant partner that CEO Mark Zuckerberg said will spend billions on Nvidia AI chips this year.
Meta Platforms anticipates that it will have a computing infrastructure of 350,000 H100 graphics cards and cited artificial intelligence as “our biggest investment area in 2024.”
In a March press release announcing the Blackwell Platform, Nvidia listed several partners and included commentary from Big Tech CEOs. Andy Jassy, president and CEO of Amazon.com Inc. (AMZN), mentioned the company’s ongoing 13-year “deep collaboration” with Nvidia. The partnership has been mutually beneficial, as Nvidia hand-picked Amazon to co-develop Project Ceiba. Alphabet CEO Sundar Pichai also expressed gratitude for having a “long-standing partnership” with Nvidia.
CEOs from Microsoft, Oracle Corp. (ORCL), Dell Technologies Inc. (DELL) and others also made similar statements. Elon Musk, CEO of Tesla Inc. (TSLA) and xAI, was more blunt in his analysis: “There is currently nothing better than Nvidia hardware for AI.”
These partnerships should continue to last for many years, but tech leaders are looking to reduce some of their costs. Amazon, Alphabet, Microsoft and Meta are working on their own AI chips. It can take several years before these tech giants have AI chips that can compete with Nvidia’s chips, and they may still do business with Nvidia after creating their own chips.
However, more AI chipmakers can force Nvidia to lower its prices and cede some of its market share. Big Tech companies also wouldn’t be as reliant on Nvidia as they are right now. Even if they create their own chips, however, Nvidia is expected to remain a major player. For now, Nvidia’s partnerships remain strong.
Tech Giants Teaming Up With Arm
Nvidia isn’t the only semiconductor company that’s attracting plenty of partnerships. U.K.-based Arm Holdings PLC (ARM) is also drawing in many Big Tech companies that want to develop in-house chips. Microsoft partnered with the firm to create AI-specific processors. The end result should be more efficient AI applications that can perform a wider range of tasks.
Apple is also one of Arm’s top partners. The Cupertino, California-based company inked a partnership with Arm that goes beyond 2040.
While Microsoft and Apple both have large partnerships with Arm, Amazon dwarfs them both. Amazon uses more than half of all Arm server central processing units (CPUs) in the world for Amazon Web Services data centers.
The company mentioned in its fourth-quarter fiscal year 2024 shareholder letter that 10 of the world’s largest hyperscalers are deploying Arm-based chips. Amazon, Microsoft and Oracle Cloud were some of the hyperscalers named.
Arm partnered with Nvidia on the Grace Blackwell Superchip. This superchip melds Nvidia’s Blackwell graphics processing unit (GPU) architecture with an Arm-based Grace CPU.
Arm’s automotive segment features partnerships with several chipmakers, such as Marvell Technology Inc. (MRVL), Texas Instruments Inc. (TXN), NXP Semiconductors NV (NXPI) and others. Arm has a partner program application that makes it easier for startups to get involved. The semiconductor company outlines a few requirements companies need to follow:
— Have a verifiable and commercially available AI solution based on Arm.
— Be willing to share use cases and business insights with Arm.
— Actively engage in Arm’s co-marketing and business development initiatives.
— Sign the Arm Partner Program end-user license agreement.
How Have the Alliances Panned Out So Far?
Most of the Big Tech companies that are deeply ingrained in AI partnerships have seen their stock prices reach all-time highs. Revenue and earnings have increased year over year for most companies. Guidance from these same companies suggests that the trend is likely to continue.
While most Big Tech stocks have outperformed the S&P 500 year to date, none often have kept up with Nvidia. Shares have almost tripled year to date and have soared by roughly 3,000% over the past five years. Nvidia briefly became the world’s most valuable corporation before being dethroned by Microsoft and Apple.
Microsoft surpassed Apple’s valuation in January 2024 and held on to its lead for a while. Apple stock recently enjoyed a significant rally and reclaimed the title after announcing its AI initiatives.
Alphabet and Amazon now command over $2 trillion valuations, and both have reached all-time highs this year. Arm stock went public last year and has nearly tripled since its IPO. Revenue and profit margins are both growing at an incredible pace.
What to Expect From AI Alliances Moving Forward
The artificial intelligence boom is still in its early innings, based on the industry’s high projected annual growth rate. So these alliances are here to stay, but a few challenges exist.
Regulatory concerns can tempt tech companies to stay on the sidelines and reduce their number of acquisitions. Microsoft and Apple both vacated their OpenAI board seats to stay on the good side of regulators.
Furthermore, some companies are looking for ways to cut costs after spending billions of dollars on Nvidia chips. Many tech giants have been collaborating with Nvidia for over a decade, but they may work toward becoming less reliant on the leading AI chipmaker.
Investing in AI stocks has been fruitful since the start of 2023. The tailwinds that catapulted artificial intelligence into the spotlight remain strong in 2024. Many tech giants have shared optimistic forecasts of what future earnings can look like. Meanwhile, AI alliances and strategies will continue to redefine the industry.
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AI Alliances: Power Partnerships in the Tech Race originally appeared on usnews.com
