Nvidia's Grip on the AI Chip Business Is Strong, but How Long Can Its Dominance Last?

Nvidia (NASDAQ: NVDA) is the most dominant player in the market for artificial intelligence (AI) chips by quite some distance. That's evident from the revenue that the chip designer generates from its data center segment each quarter, which is significantly more than its rivals generate in an entire year.

The semiconductor giant controls 85% to 90% of the AI chip market, according to some estimates. Nvidia has maintained its dominance over AI chips in the past three years thanks to a combination of factors: the technological and R&D advantages that it has enjoyed over rivals; the power of its popular CUDA software platform; its relationship with foundry giant Taiwan Semiconductor Manufacturing, and its partnerships with major AI companies, hyperscalers, and global governments.

More importantly, recent developments suggest that demand for Nvidia's AI chips continues to remain solid. But how long will the chip giant be able to maintain its dominance in this market?

Image source: Nvidia.

Rivals seem to be catching up

CEO Jensen Huang pointed out last month that Nvidia has received $500 billion in orders for its current generation of Blackwell data center graphics processing units (GPUs) and its next-generation Rubin chips, which are set to enter mass production next year -- orders that are to be fulfilled by the end of 2026. This figure, though, included revenue that Nvidia has already booked from Blackwell sales in the past year.

If we exclude the part of this "backlog" that Nvidia has already converted into revenue, it is still sitting on $307 billion of Blackwell and Rubin orders that it needs to fulfill over the next five quarters. That equates to a quarterly run rate of just over $60 billion, which would be a big improvement over the $41 billion data center revenue that Nvidia generated in its most recently reported quarter.

For comparison, rival Advanced Micro Devices (NASDAQ: AMD) is forecasting annualized growth of 60% in its data center business over the next three to five years. AMD's data center business has generated $11.2 billion in revenue in the first nine months of 2025, which points toward full-year revenue of $15 billion. So even if AMD clocks 60% annual growth in this segment for the next three years, its data center sales will go to just over $61 billion in 2028.

Broadcom (NASDAQ: AVGO), another key Nvidia competitor that has seen a terrific increase in its AI revenue thanks to its custom processors, is on track to end its current fiscal year with $20 billion in revenue, up by almost 64% from the previous year. Broadcom management pointed out earlier this year that it sees an addressable opportunity of $60 billion to $90 billion for its AI chips through 2027. That suggests more growth to come for Broadcom's AI revenue.

Importantly, both AMD and Broadcom have been inking major deals with AI companies and hyperscalers. AMD's notable contract wins include Oracle and OpenAI, and there is a good chance that it could win more business for its AI chips thanks to product development moves that are aimed at closing the gap between its GPUs and those of Nvidia.

On the other hand, Broadcom has been quickly expanding its customer base, with the highlight being its OpenAI contract, which has the potential to boost its top line by $100 billion through the end of 2029. So Broadcom's addressable opportunity in AI chips could be much larger now. Another point worth noting is that Broadcom had a massive revenue backlog of $110 billion at the end of the previous quarter. Its backlog may be much bigger now.

So Nvidia's competitors are indeed turning up the heat and seem to be gaining ground. Does that suggest that this is a good time to shift your investments away from Nvidia and into AMD and Broadcom?

Look at the bigger picture

While the rising influence of AMD and Broadcom in the AI chip market should indeed be a cause of concern for Nvidia shareholders, there is no reason to press the panic button. That's because a lot of money is set to be spent on AI infrastructure over the next five years.

According to market research firm IDC, AI could contribute just under $20 trillion to the global economy by 2030. The firm calculates that each dollar spent on AI solutions and services could generate $4.60 in value. As a result, the spending on AI infrastructure could continue rising rapidly.

Nvidia estimates that global data center capital expenditures could grow to somewhere between $3 trillion and $4 trillion by 2030. McKinsey points out that 60% of the money spent to construct a data center goes toward chips and computing hardware. So the AI hardware opportunity could stand at $2.1 trillion by the end of the decade (based on the midpoint of Nvidia's forecast and the 60% McKinsey estimate).

Even if Nvidia loses half of its share in the AI chip market, its annual data center revenue could hit a whopping $1 trillion. That would be a big jump over Nvidia's trailing-12-month revenue of $165 billion. So Nvidia is likely to remain a top AI stock in the long run, considering its massive end-market opportunity.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.