Why High Performance GPUs And Servers Will See Higher Demand In Late 2023

Faster GPUs are required for more demanding applications.

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Most of the folks in the tech research field say that PC sales will be down in 2023. According to IDC, “traditional PCs will see shipments drop 5.6% to 281 million units in 2023 while tablets will decline 6.7% to 148 million units.”

And Trendforce predicts whole server shipments will only be up 2.8% this year.

The decline in PC shipments for this year is not surprising. The industry saw spectacular growth during the Covid Pandemic when millions of people were forced to work from home, and demands for PCs skyrocketed. However, most at-home workers have bought their new PCs, and the need for new PCs has contracted. As IDC states, we will still sell about 281 million PCs this year, but they will be down significantly from past years.

While server growth has slowed down, there may be a significant uptick at the end of this year as there is one major technology that could drive higher demand for high-performance GPU-based servers and PCs.

That technology is AI. The growing interest in new AI apps like ChatGPT 3 and photo AI apps like Dall-E 2 has been significant since their release at the end of 2022. A good primer on ChatGPT comes from my friend David Pogue, who recently explained this disruptive AI technology in his CBS Sunday Morning segment.

While these AI apps genuinely enamor people, the reality is that it takes significant processing capabilities and faster servers with GPUs to provide the power to deliver AI solutions for businesses and consumers.

According to Telehouse, “The rise of artificial intelligence is affecting global data centers in two ways:

AI applications need global data centers to provide the necessary computational power. AI applications are being developed to improve the data centers themselves.”

AI is expected to be added to thousands of applications by year’s end, and one AI application, ChatGPT, is poised to need even more processing power to work correctly by mid to late 2023.

ChatGPT 3, which is out now, can support 175 billion parameters. However, ChatGPT 4 could support up to 1 trillion parameters, if not more.

ChatGPT 4 could be released in Q1 2023, but sources say the actual date of release will be when OpenAI, the company behind it, believes it will be commercially ready.

Add to that the fact that Microsoft will soon add AI to their Bing search engine and Microsoft Word, and all of the mainstream search engines will begin integrating more powerful AI engines into their products this year, too.

If that happens, there will be a higher demand for servers with more powerful GPUs that can handle more AI-based apps driven by next-generation AI technology.

While these types of apps will be a driving force for more powerful servers and PCs, a recent comment by John Chambers, former CEO of Cisco, suggests a more fundamental reason AI-based apps will have greater acceptance, especially in the enterprise.

In a recent interview with MarketWatch, Chambers said in 2023, he expects artificial intelligence and cybersecurity to be the hottest areas, but AI will grow not for fantastic new services that have not been seen before, but for a much more mundane purpose: Cutting costs.

“This is the year AI crosses the chasm, from early innovators and adopters to a majority of companies using it for cost reductions on customer service.” He expects call-center services to be the first widely adopted AI, followed by sales.

“We have seen this movie before,” Chambers said. “This year will be about saving money, increasing efficiency, and smaller companies seeing opportunities to grow.”

For AMD and NVIDIA, this may seem like dejevu. When crypto mining was hot, demand for high performance GPUs were in high demand. I suspect the demand for high performance GPUs driven by AI could cause a mad rush to acquire the latest and greatest GPUs from NVIDIA, AMD and others who create these processors. Indeed, one analyst was quoted in an article in The Street, that, “NVIDIA has in ChatGPT a potentially meaningful compute demand driver,” Citigroup analyst, Atif Malik wrote in a recent research note. The analyst indicates that rapid growth of ChatGPT could result in sales of between $3 billion and $11 billion for NVIDIA over one year.

AI itself is on track to be one of the most disruptive technologies that will drive the next round of innovation and PC and server demand in the next five years. But to do that, it will need more processing power across the board.

Given the interest in AI and its applications on the rise, I expect this to drive demand for GPU-based servers upward by the last quarter of 2023.