Microsoft announced the chips at its Ignite Conference on Wednesday.

Microsoft (NASDAQ: MSFT) has announced its entry into the custom AI chip market with the introduction of two chips at its Ignite conference in Seattle. The Maia 100 artificial intelligence chip (pictured), aimed at competing with Nvidia’s (NASDAQ: NVDA) sought-after AI graphics processing units, and the Cobalt 100 Arm chip, designed for general computing tasks to rival Intel processors, will both be integrated into Microsoft’s Azure cloud.

The move follows a trend among cash-rich tech companies, including Alibaba (HKG: 9988), Amazon (NASDAQ: AMZN), and Google (NASDAQ: GOOGL), offering diverse cloud infrastructure options for running applications. The Cobalt chips are expected to be commercially available through Azure in 2024, while the timeline for the Maia 100 remains undisclosed. (CNBC)

This strategic move aligns with Microsoft’s 21.5% cloud market share in 2022, positioning itself as a significant player behind Amazon. The company’s focus on custom AI chips is driven by customer feedback, with the Maia 100 undergoing testing for applications like Bing search engine’s AI chatbot, GitHub Copilot coding assistant, and GPT-3.5-Turbo, a language model from Microsoft-backed OpenAI. In addition to the chip development, Microsoft has introduced Sidekicks, custom liquid-cooled hardware designed to optimize data center space. The Cobalt processors show promise, outperforming existing Arm-based chips by 40% in Microsoft’s tests.

As cloud providers grapple with GPU shortages, Microsoft’s innovative approach could help meet demand while maintaining control over chip distribution. However, unlike competitors Nvidia and AMD (NASDAQ: AMD), Microsoft does not plan to sell servers containing its chips. The tech giant’s move into the AI chip domain reflects broader industry efforts to enhance cloud infrastructure efficiency amid rising prices and interest rates. While details on Maia’s performance compared to alternatives like Nvidia’s H100 are not provided, Microsoft’s strategic development positions it at the forefront of AI chip innovation.

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