Why Microsoft’s Satya Nadella had to step in amid ’chip feud’ with Nvidia

Microsoft CEO Satya Nadella had to step in to resolve a lock-step with Nvidia after the two tech giants clashed for months over the design of an artificial intelligence (AI) chip, according to a report by The Information.

The root of the issue was reportedly Nvidia CEO Jensen Huang's "tight control" over how his company's chips are distributed and installed by clients, which led to a months-long fight with Microsoft, it added.

Huang has been open about controlling who gets how many chips in order to prevent companies from stockpiling the item during periods of limited supply.

The Disagreement

The bone of contention here was that Nvidia also tried to dictate the server rack configuration within Microsoft's data centres where the chips were being installed. However, installing the chips as Nvidia wanted could have affected Microsoft's ability to switch to different AI chips, the report added citing sources.

The report said that disagreement over how Microsoft was using the hardware after its purchase led to the production of Nvidia's next flagship chip GB200 --- complete with a server rack design specified by Huang.

The long-drawn argument only concluded when it reached Nadella's desk, and he reportedly made Nvidia roll back their demands. The report added that Huang's concern with server rack configuration stems from worry that companies such as Microsoft and Amazon Web Services (AWS) will run out of data centre space.

Nvidia vs Microsoft — Most Valuable

Nvidia slid for a third session on Monday (June 24), while the chip stocks index finished down 3.02 per cent, dampening investor sentiment toward artificial intelligence- and chip-related shares during Asian trading hours, as per a Reuters report.

Notably, the stock has fallen 13 per cent since briefly overtaking Microsoft last week as the world’s most valuable company, Bloomberg reported.

The semiconductor major has been battling Microsoft for poll position as the world's most valuable company for the last week. In fact, Nvidia, Microsoft and Apple are in a three-horse race to become the world's most valuable company.