Market forecast projects AI chip market for cloud and datacenter will reach $151 billion.

The global market for AI chips used in cloud and data center environments is experiencing significant expansion. The AI chips market is projected to reach $151 billion in 2029, compared to $78 billion in 2024 and just under $10 billion in 2022. According to Alexander Harrowell, Omdia's Principal Analyst for Advanced Computing, "The most significant change is the upward revision of the underlying data center semiconductor market driven by growth in AI. Beyond that, we're noticing hyperscalers' custom chips, especially Google's TPUs, starting to capture market share from GPUs."

The landscape of AI model development has shifted considerably in recent years. The size of the biggest AI models has not advanced since January 2021, and the focus of innovation has shifted to a much greater variety of smaller ones. There are also signs that models of similar size are becoming more efficient generation on generation. While this represents a headwind for investment in AI infrastructure, it also permits more organizations to get involved, which tends to make up in breadth what is lost in depth.

Infrastructure requirements are evolving as the role of inference becomes increasingly critical. Over time, inference is going to become much more important, with expectations of a growing user base and fleet of applications requiring more inference infrastructure. Gartner forecasts that worldwide AI chips revenue will grow 33 percent to $71 billion in 2024. The value of AI accelerators used in servers, which offload data processing from microprocessors, will total $21 billion in 2024 and increase to $33 billion by 2028.

Competition and supply chain challenges are shaping the sector's near-term outlook. Design flaws could cause a delay of three months or more in the launch of chip giant Nvidia's upcoming artificial-intelligence chips, a setback that could affect customers such as Meta Platforms, Alphabet's Google, and Microsoft. Additionally, Gartner earlier indicated that cloud giants such as Meta Platforms, Alphabet's Google, and Microsoft are planning their own AI chips to become more cost-effective in their AI offerings to enterprises.