AI Server Shipments Expected to Grow Through 2026
According to research analyst firm TrendForce, shipments of AI servers are expected to experience compounded double-digit growth through 2026, bucking the trend across the tech industry. By the end of 2026, about 200,000 AI servers will be shipped to cloud service providers, up from about 125,000 in 2022. While Microsoft, Google, AWS, and Meta account for the bulk of these purchases, ByteDance has emerged as a leader in the procurement of AI servers with a 6.2% market share, almost as much as the three other Chinese giants combined (Alibaba, Baidu, Tencent).
The Role of AI Servers in TikTok’s Success
ByteDance’s inclusion of new features like the insanely popular “Bold Glamour” filter require a significant amount of processing, some of which is done on the smartphone itself and some on Tiktok’s own servers. AI servers account for a tiny fraction of the overall server market (about 1%) but they usually cost hundreds of thousands of dollars each and carry high margins as well. They represent rare good news in an otherwise morose market. Global server shipments are only expected to grow by about 1% to just over 14 million units.
Nvidia’s Dominance in the AI Server Market
GPU vendor Nvidia gets to enjoy the current AI boom with an estimated 80% market share as its technology is core to AI training. Export control restrictions implemented by the US Commerce Department against Chinese companies are unlikely to put a damper on the appetite of China’s hyperscalers to buy AI servers at an accelerating rate. The A800, launched in November 2022 by Nvidia to meet the US Government’s clear test for reduced export control, has lower available interconnect bandwidth (400GBps vs 600GBps) compared to the A100, which may hamper China’s effort in the field of AI training but doesn’t stop it completely.
Investment in AI-Based Technological Transformation
Anecdotal evidence points to a dumping of high-performance AMD EPYC CPUs in the Chinese market, a sign perhaps that cloud service providers are investing massively in new servers capable of supporting a large number of GPGPU simultaneously. Companies and organizations are scaling back IT spending as the global economy is being impacted by high inflation and sluggish growth. However, with applications such as chatbots and search engines driving the demand for an AI-based technological transformation, cloud companies will prioritize the related businesses or projects when allocating capital expenditure.