In Just 5 Words, Nvidia CEO Jensen Huang Summed Up the Company's AI Chip Dominance Strategy

The first question Nvidia CEO Jensen Huang had to answer at the AI chipmaker's annual shareholder meeting on Wednesday was how Nvidia handles rising competition.

Though Nvidia indisputably leads the AI chip market, with more than 80% of market share, competition has intensified. Established tech giants like Intel and AMD and rising startups like Etched, Cerebras, and D-Matrix are all vying for room in a highly lucrative space worth billions.

About 40% of Nvidia's revenue is believed to come from just four companies: Microsoft, Meta, Amazon, and Alphabet. All of those companies have the means to fully develop AI chips on their own one day.

So Nvidia's current customers could one day be its biggest competitors.

Huang addressed the threat of competition without calling out any rival in particular on Wednesday. In response to a shareholder question, he said Nvidia's strategy was to make AI chips that have the "lowest total cost of ownership."

Those five words don't necessarily mean that Nvidia's chips, which cost upwards of $30,000 apiece, are the cheapest on the market.

Instead, Nvidia's chips could present a "lowest total cost" overall when potential customers consider performance, the cost of running the chips, and their wider reach.

"The NVIDIA platform is broadly available through every major cloud provider and computer maker, creating a large and attractive install base for developers and customers, which makes our platform more valuable to our customers," Huang said, per CNBC.

Nvidia's chips have been around for 30 years, but until recently, they were used as graphics cards.

Huang believed that the chips could do more. In 2016, he asked his team to use the chips to build an AI server, which ended up being as big as a briefcase and cost $129,000 to make. He then hand-delivered the server to OpenAI as a gift.

Tens of thousands of Nvidia's chips now power OpenAI's ChatGPT.

Huang emphasized at the meeting that Nvidia had a head start on AI chips because it started investing in the technology a decade ago, pouring billions of dollars into the effort and adding thousands of engineers to work on it.

That first-mover advantage has paid off. Nvidia is now one of the world's most valuable companies, hitting a $3.338 trillion valuation last week.