Meaning the era of 'sovereign ai' for chipmakers
Copyright © HT Digital Streams Limit all rights reserved. Dan Gallagher, The Wall Street Journal 4 min Read May 24, 2025, 07:00 IST Tareq Amin, CEO of Humain, and Jensen Huang, CEO of Nvidia, at the Saudi-us Investment Forum in Riyadh on May 13. Photo: Reuters (Reuters) Summary If Nvidia and others strike over sovereign countries, their business will be politicized as never before. Nvidia is often considered the leading arms dealer for the artificial intelligence era. Much is to ride on the chipmaker is not actually treated like one. Nvidia and opponents, including Broadcom, Marvell and Advanced Micro Devices, design the key components that provide the massive computer power required for AI services. They all receive from the hundreds of billions of dollars that Megacap Tech businesses invest in the US to build the services. Other countries want to be on the action – in a big way. Saudi Arabia recently entered into an agreement to buy large amounts of Nvidia’s AI chips for local infrastructure projects, and Nvidia described India as an important customer. In addition, Nvidia was named a key partner in an open-led data center project in the United Arab Emirates on Thursday. Take a look at the full image Nvidia chips that were unpacked at a data center in India last year. Photo: Dhiraj Singh/Bloomberg “AI is going to be part of a national infrastructure such as Telco is part of a national infrastructure,” Nvidia CEO Jensen Huang told a meeting of analysts in January. “Each country has their own telecle.” The other side is that AI chips are now a very politicized business, which is prominent in the US China Trading War, and probably many future conflicts to come. For Nvidia and its competitors, it can be a blessing and a curse. The Trump administration has sharply limited the ability of US chipmakers to sell their wares in China and other countries. Future sales outside the US can now be linked to trade transactions with individual countries. This new political reality for AI chip enterprises was highlighted, as last week’s transactions had the time to coincide with President Trump’s swing through the Middle East. CEO Huang, who is now a global superstar, even thrown his brand leather jacket and wore a suit for the event. Huang has previously described the concept of countries’ investment directly in artificial intelligence as’ sovereign ai ‘ – and this is an important element that underlies Nvidia’s growth ambitions. Bank of America analyst Vivek Arya estimates that the sovereign AI market can reach $ 50 billion annually, or 10% to 15% of the ‘Global AI infrastructure opportunity’. Nvidia has more than doubled its annual income in each of the past two financial years, and it is expected by Wall Street to continue to grow at a strong pace with a double -digit for the next three years. It would take the company’s annual sales beyond the $ 300 billion point, a level that was no chip company ever close. Look at full image graph: WSJ -Hope is also high for Nvidia’s AI competitors. According to the consensus estimates of the visible Alpha, advanced micro-devices, also known as AMD, are increasing an increasing annual turnover by double-digit percentages in succession for the next five years. This would be an achievement that the 56-year-old slide manufacturer has not succeeded since at least 1990, which is as far back as the data measured by S&P Global Market Intelligence. AMD scored its own agreement in the desert last week and landed a $ 10 billion agreement with Saudi Arabia to provide Ai-that Center components for the country’s Humain business. Sovereign AI projects can help Chip businesses, including Nvidia and AMD, reduce their reliance on the deep pockets of businesses such as Microsoft, Amazon.com, Alphabet’s Google and Meta platforms. Capital spending by those businesses had a tear as they run to build AI capabilities, but historically such expenses were lumpy and volatile. For example, this may depend on the availability of real estate or electricity, as well as the almost-term business trends of those businesses. “Sovereign AI complements commercial cloud investments nicely,” Arya of Bofa wrote in a recent report. Stacy Rasgon of Bernstein was relatively blunt. “For investors who are concerned about the sustainability of AI Capex, we now have another customer who is willing with deep pocket and is able to spend large amounts of money on a clear strategic push as Saudi Arabia tries to position itself as a regional and global AI hub,” he wrote. Investors love the idea. Nvidia and Broadcom have seen their share prices rise by more than a third over the past month, while AMD’s shares have risen by about 30%. Sovereign AI projects will bring their own kind of turbulence. For one thing, project values announced at political events can be exaggerated and will not always be realized as income. In addition, any foreign entity that buys advanced chips must make sure that it is not of the US’s efforts to keep AI components out of the hands of China and other adversaries. Look at the full Beeld graph: WSJ The Trump administration scrapped the so-called AI Diffucial rule, which would have placed even the sales of AI chips, even for friendly countries. It was a significant victory for Nvidia and its peers, and it caused a rally in their shares. But the administration is reportedly considering new steps that can link sales of AI chips to trade transactions with individual countries. More extensively, the rise of sovereign AI Chip companies exposes levels of geopolitical plot that is normally associated with defense contractors. This can cause very unpredictability for Nvidia and its peers. For example, Nvidia’s fiscal report on the first quarter next week will include a cost of $ 5.5 billion for slides he designed for the Chinese market later for sale by the US government. Analysts are concerned about how it will affect the company’s prospects for the rest of the financial year, even with the overall demand for AI chips that are still strong. Either way, the market cap of Nvidia is back above $ 3 billion, and now before Apple’s. Investors bet a lot that this arms dealer can stay above the fight. Write to Dan Gallagher at Dan.gallagher@wsj.com, catch all the business news, market news, news reports and latest news updates on live currency. Download the Mint News app to get daily market updates. More Topics #Kartic Intelligence #semiconductors Read Next Story