Despite the heated competition between Nvidia and AMD following the latter's latest offering of MI300X, the global data center market has slowed as enterprises tighten their belts.
MarketWatch reported that Nvidia shares had risen about 190% since the beginning of the year, and AMD's shares are also up nearly 100% for the same period. However, the report quoted Vivek Ayra, a securities analyst at Bank of America, indicating that the market expectations may have exceeded the fundamentals. Ayra revised downward his estimation for total capital expenditures at cloud services providers from the previous 4.7% annual growth to 2.5% year-on-year.
Ayra told MarketWatch that cloud service providers may extend the upgrade cycle of conventional CPUs from the usual 3-4 years to 5-6 years.
According to DIGITIMES Research analyst Jim Hsiao, despite the hype around ChatGPT, global server shipments declined in the first quarter of 2023 and may see a sequential growth of 3.9% in the second quarter. He further said that the first-quarter shipment of North American-based cloud service providers was lower than expected, adding that although US-based providers would increase their AI server shipments in the second quarter, the contribution to the overall market would be limited due to the premium price.
Meanwhile, Gartner forecasts that worldwide spending on data center systems will grow by 3.3% year-on-year in 2023, down from 11.1% for the previous year.
Despite the macroeconomic headwinds that impact cloud infrastructure spending, major providers, such as Amazon and Microsoft, have been increasing their capital expenditures in recent years. Amy Hood, Microsoft's executive vice president and CFO, said on the latest earnings call that Microsoft expects capital expenditures to have a material sequential increase on a dollar basis, driven by investments in Azure AI infrastructure.
According to IDC's forecast, spending on cloud infrastructure will grow at a CAGR of 10.5 between 2022 and 2027, reaching US$144.3 billion.
Capex of major cloud service providers (US$m) | |||||
Date | Amazon | Microsoft | Alphabet | Meta | Tencent |
2020 | 40,141 | 17,592 | 22,281 | 15,115 | Not disclosed |
2021 | 61,053 | 23,216 | 24,640 | 18,628 | |
2022 | 63,645 | 24,768 | 31,485 | 31,431 | |
1Q23 | 14,207 | 6,607 | 6,289 | 6,842 | |
% of Nvidia revenue (as of May 2023) | 3.73 | 3.19 | 3.84 | 2.86 | |
% of AMD revenue (as of March 2023) | 2.64 | 3.32 | 1.74 | 1.61 | 1.03 |
Source: Bloomberg, companies, June 2023
