121 AI Processor Companies: Who Will Reign Supreme?

Key points

Over 120 companies are developing AI processors, with more than $13.5 billion in start-up funding and an estimated $60 billion in R&D spent by 26 public companies.
The AI processor market is expected to experience rapid consolidation, with only around 25 companies surviving by the end of the decade.
The US currently leads in AI hardware and software, but countries like China and India are making significant advancements, with companies like Huawei and DeepSeek pushing advanced chips.

According to a recent report from Jon Peddie Research, a market research firm specializing in the graphics marketplace, the AI processor market is booming, with over 120 companies involved in making or developing AI processors. These companies have collectively attracted more than $13.5 billion in start-up funding, with dozens raising $100 million or more in the past year alone. In addition to the significant start-up funding, an estimated $60 billion has been spent on research and development by 26 public companies.

Dr. Jon Peddie, president of JPR, describes the current situation as a "Cambrian explosion" of AI processor development, similar to the 3D graphics boom of the late 1990s and the XR wave of the 2010s. However, he notes that almost none of these companies have actual products on the market, with maybe only 10% having a real product. The rest are still in the development stage, with many companies only having "slideware", or presentations and ideas, but no actual products.

The AI processor market is highly competitive, with many companies competing against industry giants like Nvidia and AMD. Dr. Peddie notes that many of these companies, which he refers to as "YANKs" (Yet Another Nvidia Killer), have little chance of success. He says that AMD can already make almost anything Nvidia can, and yet they barely show up in AI. This makes it even harder for startups to convince companies like Dell or SuperMicro to use their chips instead of Nvidia or AMD.

The US currently leads in AI hardware and software, but other countries like China and India are making significant advancements. China’s DeepSeek and Huawei are pushing advanced chips, and India has announced an indigenous GPU program targeting production by 2029. Policy shifts in Washington are also reshaping the playing field, with the rollback of export restrictions allowing US companies like Nvidia and AMD to strike multibillion-dollar deals in Saudi Arabia.

JPR categorizes vendors into five segments: IoT, Edge, Automotive, data center training, and data center inference. Of these categories, inference has the most startups, with 90 companies developing inference-based systems. Dr. Peddie notes that inference offers the most versatility, with applications ranging from wearable health monitors to smart vehicle sensor arrays, and everything in between.

Despite the challenges and competition in the AI processor market, Dr. Peddie says that this is an exciting time, with many novel ideas being tried, such as analog neuron processors and in-memory processors. As the AI processor market continues to evolve, it will be interesting to see which companies will emerge as leaders and which will fall behind. The US and other countries will need to continue investing in AI research and development to stay ahead of the competition, and companies like Microsoft, with its Azure cloud platform, will play a crucial role in shaping the future of AI. With its strong presence in the cloud computing market, Microsoft is well-positioned to take advantage of the growing demand for AI processors and AI-based services.