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    Nvidia is throwing its weight around — and even Amazon is bowing down

    Nvidia’s expansion into cloud services has given the titan chipmaker leverage over its own customers.

    Justin Sullivan via Getty Images

    Nvidia is using the sky-high demand for its chips to its advantage.The company’s expansion into cloud services and new hardware has Nvidia competing with its own clients.And Nvidia clients like Amazon want chips so badly they’re helping it compete, per The Information.

    Nvidia knows its customers are desperate to get their hands on its GPUs, and the company is using that to its advantage.

    Even Amazon is bowing down, according to a new report from The Information.

    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.

    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’s data centers and then, promising greater computing capability, leases them back to Nvidia’s customers, The Information reported.

    At first, AWS was hesitant to allow Nvidia to set up a competing shop right under its nose, according to The Information. But once other rival companies agreed to the terms of DGX Cloud, AWS had no choice but to relent — it just couldn’t risk souring its relationship with the supplier of its crucial chips, per the outlet.

    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 said Amazon worked closely with Nvidia to develop features in the DGX Cloud offering that offered customers “the best of both companies.”

    “We have a deep collaboration with Nvidia that goes back more than 13 years, when together we launched the world’s first GPU cloud instance on AWS, and today we offer the widest range of Nvidia GPU solutions for customers,” Amazon’s spokesperson told BI.

    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, per The Information. 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 titan chipmaker, in addition to demanding its clients provide proof of their expanded data center capacity, is also telling customers how to design the racks that hold the servers and GPUs within those data centers, the outlet reported.

    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 like 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, called 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. The Department of Justice is looking to launch an investigation into potential antitrust violations, Politico reported earlier this month.

    The feds are preparing to investigate whether Nvidia came to become the leading supplier of high-end semiconductors through anticompetitive behavior, per Politico.

    A spokesperson for Nvidia declined to comment when reached by Business Insider.

    Read the original article on Business Insider

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