The Backup Plan That Toppled a Kingdom

Editor's note: Nvidia has been the AI boom's poster child... until now. According to Joel Litman, chief investment officer of our corporate affiliate Altimetry, a key competitor is starting to catch up. In this issue – adapted from the free Altimetry Daily Authority e-letter – he explains why we could see a repeat of the '80s tech boom... where an unseated leader opened the door to a much wider group of winners.

The processing king created its own worst enemy...

But it didn't have a choice.

IBM (IBM) was at the top of the computer world in the '80s. Its machines were already the gold standard in office settings. And as technology got cheaper, it was finally possible to sell computers straight to consumers.

The tech giant always made its own parts – from the chips to the hardware to the software. But building an entire personal computer was a whole different beast.

With competitors racing to catch up, IBM couldn't afford to wait. So it turned to a leading name in computing power... a chipmaker known as Intel (INTC).

Intel agreed to build the "brain" of IBM's first PC. But the big win came with one condition...

Since IBM had never outsourced before, it was anxious about putting that much trust in a single supplier. So it told Intel it had to find one other supplier that could make chips compatible with its processor.

Enter Intel's solution – and its big mistake...

The Tech Giant That Helped Create Its Own Rival

To meet IBM's request, Intel reached out to a credible second-source supplier called Advanced Micro Devices (AMD)...

In 1982, the companies hatched an agreement that gave AMD access to certain Intel designs. The idea was, it would use those designs to build compatible chips for the new PCs.

Within a few years, the PC market took off. PC sales exploded from $5.4 billion in 1982 to $30 billion by 1990.

Since Intel started as the only game in town, every PC used its processing architecture, known as x86. So every competitor should have been forced to use Intel's PC "brain." And they should have had to go through IBM to do it.

But AMD was no longer just a backup plan. Instead, Intel had handed it the blueprint... and signed over the keys to the castle.

The competition didn't need Intel at all. They could go straight to AMD... whose chips were just as good and cost far less.

IBM started the decade with a dominant 80% PC market share. By the early '90s, it owned only 20% of the market.

Today, AMD has its sights set on its next great competitor... Nvidia (NVDA).

There's More to the AI Chip Boom Than Nvidia

The Magnificent Seven giant has been the undisputed leader in AI chips for years. Its processors, software, and developer ecosystem have set it apart. It's the default choice for companies building large AI systems.

But that lead isn't as secure as it once was.

Nvidia's AI-accelerator market share peaked around 87% in 2024. Estimates for this year put it between 75% and 80%.

That doesn't mean Nvidia is shrinking. Its sales are still hitting records.

But the AI-chip market is simply growing faster than any one company can supply it. And just like IBM in 1981, today's biggest AI buyers are nervous about trusting their futures to one chipmaker.

In October 2025, ChatGPT developer OpenAI signed a deal with AMD for 6 gigawatts of its AI chips. The first gigawatt, built on AMD's new MI450 chips, is slated to come on line in the second half of this year.

Oracle (ORCL) plans to deploy 50,000 of those same chips. And Facebook owner Meta Platforms (META) has signed its own multi-gigawatt deal with AMD.

Then there are the chips Nvidia's customers are designing for themselves...

Google parent Alphabet (GOOGL) has its tensor processing units. Amazon (AMZN) has its Trainium chips. And Broadcom (AVGO) is helping several tech giants design custom AI chips of their own.

Every one of those chips is a slice of the market that doesn't go to Nvidia.

For years, if you owned Nvidia, you owned the AI boom. But that's not the case anymore. "AI chips" and "Nvidia" are no longer the same trade.

Nvidia has been a giant for years. Its software ecosystem gave it a powerful advantage.

However, the AI build-out is now big enough to support more than one winner. AMD is landing contracts that would have gone to Nvidia by default just a few years ago. And custom-chip designers are carving out their own share of the spending.

Intel learned the hard way that a backup supplier can become a serious rival. Nvidia may be learning the same lesson today. And so will investors.

There are more places to profit from AI than just Nvidia... even within the chip industry.

Regards,

Joel Litman

Editor's note: The market is undergoing a dramatic paradigm shift... And the sell-off last week is just the first warning sign. Joel warns that even if all the major indexes stage a comeback, your investment portfolio could still get pummeled as a result of this "changing of the guard." That's why he's joining forces – and systems – with Brett Eversole to help subscribers prepare for this switch-up on November 19.