Inside the Inference Hardware Revolution Of 2026

Tensordyne’s Napier chip is designed to accelerate AI inference. Since about 2020, AI has largely focused on training bigger and better models. Large language models (LLMs) ballooned from millions of parameters to trillions. This proved effective: The largest version of OpenAI’s GPT-3, released in 2020, correctly answered just 43.9 percent of questions on a popular knowledge-and-reasoning benchmark. Just four years later, GPT-4o reached a score of 88.7 percent on the same exam, effectively matching those of human experts.Advanced AI labs are still training ever larger models, but that training has somewhat receded to the background of the AI conversation. In 2026, inference—the use of trained models to produce code, write essays, or make images of ourselves as elves—has come to the forefront.“It’s like training is yesterday’s news,” says Matt Kimball, principal data-center analyst at Moor Insights & Strategy. “All that any chief information officer wants to talk about is inference.” Nvidia CEO Jensen Huang, speaking at the company’s GTC 2026 conference, touted this change as the “inflection point of inference.”Part of what’s caused the shift is very simple: LLMs are becoming useful, so people are using them. On top of that, many models on the market today are reasoning models. In response to a user’s query, they run inference not just once but multiple times, reprompting themselves in a process called chain of thought. Reasoning models generate longer outputs, and models with high reasoning effort can produce up to 20 times as much text as those with low or no effort. Adding even more to the world’s inference workload, the rise of agentic AI has resulted in inference running not just as a real-time response to a user’s query but also around the clock, working autonomously toward a user-defined goal. Amazon’s Trainium chip was originally designed for AI training. However, Amazon Web Services chose to break up AI inference into two parts, with Trainium running the more computationally complex portion and Cerebras’s wafer-scale engine taking on the more memory-intensive portion.AmazonThe resulting explosion in inference demand has led to unexpected alliances among tech giants. OpenAI and Amazon have deployed chips the size of a dinner plate designed by Cerebras, despite Amazon having its own Trainium chips. Nvidia bought key talent and intellectual property from AI-inference startup Groq in a controversial deal worth US $20 billion. And Anthropic is paying LLM competitor SpaceXAI over a billion dollars per month to lease spare compute.Although they might seem similar, AI training and AI inference are computationally different. These big moves from tech giants signal that in order to support the inference demand, we’re going to need a very different mix of hardware than experts may have expected even a couple of years ago.How does AI inference differ from AI training?An untrained LLM is like a jumble of Scrabble tiles on a table. Instead of single letters, though, the tiles show fragments of words, called tokens. Everything you’d need to write almost anything is present, but nothing makes sense.Training a model organizes this jumble using a guessing game played at scale. The model is shown real text with the next token hidden and asked to predict what comes next. After each guess, the correct token is revealed and then compared to the prediction, and the difference is used to calculate the model’s accuracy. The game is played not with a single sentence but over billions of passages.While a real game of Scrabble can be played over a bag of chips and a few drinks, AI training is computationally intense. The model updates its parameters through backpropagation, a process that repeatedly calculates how each of a model’s billions or trillions of parameters should shift to make the next prediction better. This is why tech giants are building larger data centers than ever before.Eventually the model’s creator decides further training isn’t worth the cost, and the guessing game stops. Backpropagation ends, the parameters are frozen, and the LLM becomes a pretrained model. Fine-tuning—a short training run on smaller, more specialized data—adds final tweaks, and the model is deployed.Nvidia’s Groq 3 language-processing unit minimizes data movement by placing on-chip SRAM memory and computational blocks in the order they are needed on-chip. NvidiaNext comes inference. This is the process of using the deployed model, which, now that it’s been trained, has learned to spit out Scrabble tiles—tokens—in a sensible order.You might think that AI inference is less computationally demanding because the backpropagation calculations used to update parameters are eliminated. But Sudeep Bhoja, founder and CTO of the inference-hardware company d-Matrix, explains that inference adds new challenges.The models are “autoregressive” in nature. That is, the next output depends on the previous one. “So to generate the next token, you have to read all of the weights and all of the [context] from the previous token,” explains Bhoja. The context includes all of your prompts, all of the LLM’s replies, and all of the files you upload. It’s a lot of data and a lot of processing.An LLM generates its reply in two phases: prefill and decode. Prefill is the model reading a prompt. It processes every token at once, computing how each token relates to all the others. This operation is called attention, and it’s a defining characteristic of the transformer architecture behind modern LLMs. It allows them to respond to a word in its sentence, paragraph, and larger context rather than on its own. Think of it like arranging Scrabble tiles before you place them in a game. Many players move tiles around to imagine how they connect. Self-attention plays a similar role, though instead of moving physical tiles, each token sends a query to the others and receives a score indicating the token’s relevance.These queries result in two types of vectors: the keys and values. They are typically placed in a store called the KV cache. This isn’t strictly required, as a model could instead recompute these vectors with each new token it generates. But nearly all LLMs use a KV cache to reduce how much computing they do. The KV cache is stored in memory and becomes a scratchpad to which the LLM can return to understand a conversation, and though it starts small, it can swell to dozens of gigabytes.Prefill is a problem that can be easily divided up and worked on in parallel. This is why GPUs became the dominant AI accelerator as LLMs surged in popularity. Graphics rasterization (computing the color of every pixel on a screen) is also massively parallel, so GPU architectures were a natural fit.Cerebras’s wafer-scale engine chips maximize memory bandwidth by keeping everything—both memory and computational units—side by side on the dinner-plate-size chips.CerebrasNext comes decode. Here, the model generates its reply one token at a time. At each step it takes the most recent token, weighs it against everything in the KV cache, uses that information to predict the next token, and adds the new token’s key and value to the cache. Then it repeats in sequence, token by token.This is where the autoregressive nature of the model works against inference speed. Predicting each token requires reading the entire model from memory, and that model consists of possibly tens to hundreds of gigabytes of parameters (the numbers representing what the model learned in training). Crucially, this is in addition to the memory required to store the KV cache.As a result, the movement of all this data through memory often requires more bandwidth than inference hardware has available. So at least some of the computing parts of a GPU sit idle as it waits for data. Researchers found that Nvidia H100 GPUs running open-source LLMs sit idle 50 to 80 percent of the time.Memory’s role in inferencingShahriar “Sha” Rabii, former head of silicon engineering at Meta and cofounder of the AI startup Majestic Labs, says idled processors are why many companies that are trying to improve AI-inference performance are laser-focused on memory. “With the GPU-based approach, you end up greatly over-provisioning compute and starved on memory. That’s driving the big [memory] scale out,” he says.Bhoja’s d-Matrix and Rabii’s Majestic Labs both focus on this memory bottleneck. However, their companies imagine different solutions.d-Matrix’s second-generation AI accelerator, Raptor, aims to improve inference performance by minimizing the distance between compute and memory. The GPUs in most current AI-inference deployments do this by placing high-bandwidth memory (HBM) around the perimeter of the GPU. Each HBM is a stack of DRAM dies linked together and connected to a superfast interface to the GPU. This is great for training, but for inference, the amount of memory you can stack this way and the bandwidth it can provide leave something to be desired.d-Matrix’s Raptor removes that bottleneck by stacking an AI accelerator on a DRAM die. Instead of stacking memory, d-Matrix stacks memory and compute. Bhoja says this reduces the distance that data must travel to “micrometers instead of millimeters.” Like building a skyscraper, going vertical makes it possible to do more inside the same physical footprint.Majestic takes the opposite approach. Instead of trying to minimize the length that data must travel between compute and memory, the company is focused on improving the memory interface to accommodate longer wire traces while keeping bandwidth high. Longer wires allow Majestic to connect memory stacks that aren’t directly next to the GPU, removing the space limitation of HBM.“A memory interface has a very short physical distance it can operate over. In the case of HBM, it’s up to 2 or 3 millimeters. You have this shoreline around the periphery, which is the only place where you can put HBM,” says Rabii.Majestic claims its memory