The Chicago Journal

Singapore’s Data Center Boom Powers Nvidia’s Revenue Surge

In a recent financial disclosure by Nvidia, an intriguing trend has come to light, revealing that an impressive 15% of the chip giant’s revenue, totaling a substantial $2.7 billion, is attributable to Singapore. This unexpected surge in revenue from the compact city-state has prompted industry experts to delve deeper into the underlying factors propelling this phenomenon.

The Dominance of Singapore in Nvidia’s Q3 Sales:

The U.S. Securities and Exchange Commission filing, which has unveiled Nvidia’s latest financial figures, sheds a revealing light on Singapore’s pivotal role in Nvidia’s third-quarter success. Notably, the revenue generated from Singapore witnessed an extraordinary surge of 404.1% compared to the same period a year ago, surpassing the overall revenue growth of Nvidia by a significant margin of 198.6%.

Singapore’s Stand in Nvidia’s Sales Rankings:

In the intricate landscape of Nvidia’s third-quarter sales rankings, Singapore secures a prominent position, trailing only behind the U.S. (34.77%), Taiwan (23.91%), and China, including Hong Kong (22.24%). This observation sparks a compelling curiosity to explore why this diminutive city-state is contributing substantially to Nvidia’s global success.

The Role of Data Centers in Singapore:

Maybank Securities analyst Jarick Seet provides a plausible explanation for Singapore’s prominence in Nvidia’s revenue stream. With a burgeoning number of data centers and cloud service providers, Singapore emerges as a focal point for Nvidia’s chip utilization. Seet speculates that these chips might be destined for final assembly with other products, serving diverse purposes such as artificial intelligence, computing, and electric vehicles.

Singapore’s Strategic Advantages:

Sang Shin, a seasoned executive with experience at Temasek and GIC, attributes Singapore’s heightened chip demand to its stability, secure environment, abundant talent pool, robust digital infrastructure, and government policies favoring digital and data services. This nuanced analysis provides a comprehensive understanding of why Singapore has become a central hub for Nvidia’s chip distribution.

Data Center Segment Dominance:

Further scrutiny of the SEC filing unveils that an astonishing 80% of Nvidia’s third-quarter sales are attributed to the data center segment. Within this segment, cloud service providers play a pivotal role, driving approximately half of the data center revenue, while the remaining half comes from consumer internet companies and enterprises.

Singapore’s Growing Data Center Landscape:

Citi analysts, in a report dated November 27, shed light on Singapore’s growing prominence in Nvidia’s revenue stream. They reveal that a consumer internet company significantly contributed to data center solutions in Q3, emphasizing the city-state’s emergence as a hub for specialized Cloud Service Providers (CSPs).

Regulatory Changes and Market Rankings:

Significant regulatory changes have played a crucial role in Singapore’s ascent. The lifting of a moratorium in January 2022, coupled with strategic partnerships with industry giants like Equinix, Microsoft, GDS, AirTrunk, and ByteDance, positions Singapore as a thriving ground for data center projects. As of January 2022, more than 70 operational data centers exist in Singapore, constituting 60% of Southeast Asia’s total data center capacity.

Singapore’s Global Recognition:

A report by Cushman and Wakefield solidifies Singapore’s global recognition by ranking it third globally and first in the Asia Pacific in terms of data center market rankings. This acknowledgment cements Singapore’s position as a key player in the global data center landscape, trailing only behind Northern Virginia and Portland in the U.S.

Anticipating Future Demand:

Looking ahead, the International Trade Administration predicts sustained high demand for data centers in Singapore. This demand is fueled by the rapid growth of digital applications, e-commerce, IoT, AI, crypto-trading, blockchain activities, and online gaming. The shift to hybrid working and business digitalization further contributes to the escalating demand for data center space.

Nvidia stands with the Microsoft deal

Nvidia Microsoft has been on a roll with its artificial intelligence breakthroughs in 2023, and it now appears that the corporation will continue to triumph.

On Tuesday, the tech titan announced that it will add Xbox PC games to Nvidia’s cloud gaming service.

According to reports, the gaming chipmaker objected to a huge gaming deal.

The news

The announcement came after Microsoft President Brad Smith met with European Union officials on Tuesday.

His attempts to persuade them that Activision Blizzard’s proposed $69 billion acquisition would increase competition dominated the discussion.

To avoid the merger being declared illegal, Microsoft vowed reconciliation, thereby expanding its gaming market, which accounts for 9% of total revenues.

Despite dwindling Xbox console sales, Microsoft has expanded its game collection and enabled consumers to play through Microsoft cloud data centers.

Brad Smith said at a press conference that Xbox titles will be available instantaneously on Nvidia’s GeForce Now cloud game services.

Smith indicated that following the acquisition of Activision, all Activision Blizzard titles would be accessible on GeForce Now.

Nvidia yields

In a joint statement, Microsoft and Nvidia announced a 10-year deal, putting Nvidia in the same regulatory boat as Microsoft’s proposed purchase.

According to Bloomberg, Nvidia has voiced concerns to the US Federal Trade Commission regarding the Activision deal.

Nvidia’s senior vice president of GeForce, Jeff Fisher, stated:

“Combining the incredibly rich catalog of Xbox first party games with GeForce Now’s high-performance streaming capabilities will propel cloud gaming into a mainstream offering that appeals to gamers at all levels of interest and experience.”

“Through this partnership, more of the world’s most popular titles will now be available from the cloud with just a click, playable by millions more gamers.”

In January 2022, Microsoft proposed acquiring Activision Blizzard, but the deal has since been rejected by regulators in the United States, the European Union, and the United Kingdom.

Investigations

The Nvidia agreement, according to Brad Smith, is essential because it allows Microsoft to resolve a number of regulatory issues.

In November, the European Commission initiated an extensive investigation into the transaction, voicing concerns that it might hinder competition in the video game sector.

Last year, the EU Commission voiced concern that if the deal goes through, Microsoft may restrict access to the game on other platforms.

The commission is also worried that Microsoft would gain an unfair advantage in cloud gaming.

Subscriptions

Microsoft has launched the Game Pass service, which costs $9.99 a month and provides gamers with access to a wide number of titles.

The acquisition of Activision would allow them to bring high-profile titles to Game Pass.

Nvidia’s GeForce Now service has more than 25 million users.

Microsoft, on the other hand, claimed to have 25 million Game Pass subscribers.

Nvidia offers both free and premium GeForce Now tiers, with the latter offering a higher resolution.

GeForce Now subscribers may stream games purchased from Microsoft’s app store, as well as titles purchased from Epic Games and Steam’s app shops, across the cloud.

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The ten-year commitment

When Microsoft purchased Activision, it agreed to provide Call of Duty to Nintendo for a 10-year period.

Many saw the comment as an attempt to assuage antitrust authorities’ worries.

Moreover, Smith tweeted on Tuesday that the two have signed a formal 10-year legal agreement to make Call of Duty available to Nintendo fans on the same day Microsoft’s Xbox was released.

The Microsoft CEO also remarked that the purchases of Nintendo and Nvidia help gaming competition.

“I think if you’re a competition regulator and you’re focused on the interests of consumers and competition, today was a good day,” said Smith.

Regulators eye the deal

European officials aren’t the only ones concerned about the merger; officials in the United States and the United Kingdom are as well.

The UK’s Competition and Markets Authority claimed earlier this month that the merger will exacerbate competition difficulties, resulting in higher prices, fewer alternatives, and less innovation.

According to the regulator, the transaction might be halted, and Microsoft’s choices include divesting the Call of Duty brand.

Smith, on the other hand, claimed that the firm does not need to sell the Call of Duty game.

“It just isn’t something that seems to be lining up,” said Smith.

“The only reason to sell it off is the CMA’s potential concern that if we buy it, we won’t provide it to others as broadly.”

“I think that concern should be dispelled by the two agreements we’ve signed today.”

FTC involvement

In an attempt to block the Activision merger, the FTC filed an antitrust case against Microsoft in December.

Alphabet, Google’s parent firm, was plainly dissatisfied with the Microsoft purchase and filed a complaint with the FTC.

“The European Commission asked for our views in the course of their inquiries into this issue,” said a Google spokesperson.

“We will continue to cooperate in any processes, when requested, to ensure all views are considered.”

Although not responding to the charges, Alphabet’s worries were addressed by Brad Smith, who stated:

“It’s easy to understand that Google might have questions about whether something like Call of Duty would be available in the future on, say, Chromebooks and the Chrome operating system.”

US government orders Nvidia and AMD to halt exports to China

Due to their high quality craftsmanship, Nvidia (NVDA) and AMD are two of the leading US chipmakers in the tech industry. 

Recently, the US government ordered tech giants to stop selling their technology to China, even though China is one of their major customers.

The reason is that their technology can be used for artificial intelligence.

On Wednesday, the two chipmakers announced that the US government had ordered them to stop exporting high-quality chips to the world’s second-largest economy.

NVIDIA

Nvidia shared a filing motion in which U.S. officials said the decision was made because of a potential risk that the products could be used or diverted to a “military end user.”

The limitation falls on Nvidia’s A100 and upcoming H100 ICs, along with any systems that contain the two chips.

According to the company, the order is effective immediately.

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How does this affect sales?

According to the filing, the decision could wipe out $ 400 million in deals for the company.

The numbers were compiled last week by the California-based tech giant as they discussed potential sales in China.

Therefore, their projection may be affected by the new requirement.

Both companies also suffered, with Nvidia shares down 6.6% in after-hour trading on Wednesday. Meanwhile, AMD’s shares fell 3.7%. 

Nvidia is currently working with its customers in China to try to “satisfy their planned or future purchases with alternative products and may seek licenses where replacements aren’t sufficient.”

AMD

AMD has also received new requirements from the US Department of Commerce, which will affect the shipment of its MI250 ICs to China.

The company released a statement about another set of components, stating:

“At this time, we do not believe that shipments of MI100 integrated circuits are impacted by the new requirements.”

“We do not currently believe it is a material impact on our business.”

Tensions between the United States and China

The latest order shows how tensions between the US and China are overshadowing the commerce and technology industries, among other things.

However, the two countries recently agreed to review Chinese companies listed in the United States, which has offered a breakthrough in their relationship.

Despite the progress, experts have warned that the deal will only play a minor role in addressing other important issues.

The orders for Nvidia and AMD also extend export bans to Russia.

The two companies said they currently do not sell any products there, as they stopped selling after the invasion of Ukraine earlier in the year.

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China responds

News of the decision reached the Chinese authorities, who opposed the decision. State media responded to the United States and said:

“Actions from the United States deviated from the principle of fair competition and violated international economic and trade rules.”

Beijing also released a statement stating:

“The US side should immediately stop its wrongdoing, treat companies from all over the world including China fairly, and do more things that are conducive to the stability of the world economy.”

Meanwhile, the US Department of Commerce responded to his statement.

“We are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and users to protect US national security and forreign policy interests,” said a Commerce Department spokesperson.

“This includes preventing China’s acquisition and use of US technology in the context of its military-civil fusion program to fuel its military modernisation efforts, conduct human rights abuses, and enable other malign activities.”

References:

US chip makers hit by new China export rule

US orders Nvidia and AMD to stop selling AI chips to China