BrettSimpson,AnalystAreteResearchServicesLLPbrett.simpson@arete.net+44(0)2079591320KarinaSutija,AnalystAreteResearchServicesLLPkarina.sutija@arete.net+44(0)2079591314MartinAlipiev,AnalystAreteResearchServicesLLPmartin.alipiev@arete.net+44(0)2079591321ForReg.ACcertificationandImportantDisclosures,seethelastpage(s)ofthisreport.1AISilicon:RageAgainsttheMachinesSemiconductors25January2018ItiseasytogetcaughtupinthewaveofAIhypesweepingfinancialmarkets,buttalkingtoover20companiesintheeco-systempointstomajorchangescominginAIsilicon.AIaccelerationisonlyatanearlystageofdevelopment,notreadyforwidespreadadoptionin’18.Ofthec.11mserverssoldin‘17,lessthan100kwereacceleratedforAItraininginourview.Evenifvolumestriplethisyear,themarketisstilltiny.Wealsoseeaninevitableshiftfromgeneral-purposeprocessingtocustom“graphprocessors”sothatfutureAIchipsrealiselog-scaleimprovementsincost/performance.Bothtrainingandinferencewillbemanagedonthesamechip.Wethinkthehighcostofacceleratedcompute(specificallyNVDA’sGPUs)andtheacuteshortageofAIengineersareholdingbackthemarket.Welayoutthefollowingthreetakeaways.NVIDIAvs.CloudPlayers:TakethePowerBack.NVIDIA’sexcessivepricinghasledcloudplayerstoinvestintheirownsiliconandencourage$1bn+inVCfundingforAIchipstart-ups.CUDAisgettingeclipsedbyhigherlevelframeworksfordevelopers(againbackedbythefiveleadingcloudplayers).WethinkovertimeGPUswilllosetheirpositionasthestandardbearerforAI,forbothtechnicalandcostreasons.AICompute:KnowYourEnemy.Weexpectmorecaptivechipdevelopments(followingGoogle’sTPU),whileanumberofcrediblestart-upsarerampingfirstchipsin‘18.Fromallthisdisruption,weseeTSMCasthestandoutwinner;itisthedefaultoptionforaraftofnewcustomersusingitsnew7nmHPCprocess.AIMemory:BullsonParade.WebelieveDRAMisquicklybecomingthebiggestportionoftheAIbillofmaterialstoday,andHBM2isemergingasthenewstandardforAI(pricedat$20+perGB).WeseeHBM2salesagaindominatedbySamsung,rising4xtoc.$1bnTAMin’18,althoughthisjustc.1%ofDRAMindustryrevs.Withnorealtechnologydisruptionaheadi...
