Funding for AI Chipmakers Plummets as Nvidia Ascends

Nvidia’s gain has reportedly been other chip startups’ loss.

The firm has become the go-to company for computer chips used in artificial intelligence (AI) processes, which has shut off the funding tap for the company’s potential competitors, Reuters reported Monday (Sept. 11). Deals in the United States have dropped 80% since last year.

Even before Nvidia’s stock skyrocketed, it was the No. 1 player among hardware and chip-focused providers, with its graphics processing units (GPUs) cited in research papers 90 times more than the top AI chip startups put together.

“Back in 2022, the company’s data center GPU revenues totaled $3.8 billion,” PYMNTS wrote in May. “The full-year contribution from data center revenues came in at $15 billion for the fiscal year that ended in January 2023, which grew 41% year on year — and 2021 was up 53% from the previous year.”

Nvidia saw its market value hit the trillion-dollar mark earlier this year thanks to high demand for its chips, which are used to train generative AI models. As its stock has taken off, investors in other chip startups have grown cautious, the Reuters report said.

“Nvidia’s continued dominance has put a really fine point on how hard it is to break into this market,” Greg Reichow, a partner at Eclipse Ventures, told Reuters. “This has resulted in a pullback in investment into these companies, or at least into many of them.”

American chip startups raised $881.4 million through the end of August, down from $1.79 billion during the first three quarters of 2022, per the report. The number of deals fell from 23 to four for the first eight months of the year.

Meanwhile, PYMNTS Intelligence found that while AI has become integral across many businesses and industries, many consumers aren’t clear on the role AI plays — or should play — in their lives and jobs.

Work is one area where consumers don’t want AI involved, with just 37% saying they were at least somewhat interested in AI impacting their jobs.

However some workers also said AI can remove friction and improve efficiency and accuracy at the office. Generation Z workers were the most likely to acknowledge AI can replace some skills, but also the most likely to show interest in AI-augmented work.

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