The Crucial Market That Could Help NVIDIA Rule Computing


NVIDIA (NASDAQ: NVDA) made a slew of announcements this week to launch its week-long GTC virtual conference, which focused on new data center hardware and software capabilities.

It’s been a busy year for the GPU (graphics processing unit) pioneer, which continues its takeover of network company Mellanox with the announcement of its intention to buy Arm Holdings for 40 billion dollars of Softbank Group.

If I had to pick just one semiconductor stock to own over the next decade, NVIDIA easily would.

Image source: Getty Images.

Deepening of the specialties of calculation processors

First of all, the announcement of the material. Ahead of a tie-up with Arm, NVIDIA said it would use the architecture of UK-based chip designers for a new family of processors for data centers. In the spring, CEO Jensen Huang discussed the “three pillars of modern computing”. In Huang’s view, the familiar CPU (or central processing unit, which was invented by Intelligence) will continue to be used for general purposes. But as Moore’s law loses speed, the GPU invented by NVIDIA will become a compute accelerator, used for specialized data-intensive tasks such as training and deployment of AI.

But the third pillar of Huang’s vision is the DPU (Data Processing Unit), a unit specializing in the management of data centers. With the advent of the cloud over the past decade, the data center has become a new basic computing unit. And with the increase in access to high-speed internet connectivity, data centers have become even more important as organizations and individual users leverage them to lift heavy objects rather than collecting information directly from their devices. local.

NVIDIA’s new chips, built on Arm’s multi-core CPU architecture, are called the BlueField-2 DPU family and will begin to be deployed in server hardware systems in 2021. Associated with GPU for specialized tasks and network equipment acquired from Mellanox Earlier in 2020, NVIDIA now has a full suite of hardware aimed at the modern data center IT unit. Having Arm in the fold would increase NVIDIA’s ability to pursue this strategy – as well as disrupt other markets like smartphones and build on the momentum NVIDIA already has in delivering technology to the automotive, manufacturing, medical and entertainment industries.

Data centers are an essential future of IT

In addition to the new hardware, NVIDIA also announced the release of new AI software based on its data center work. Highlights include natural language processing platform Jarvis, Merlin Web Advisor, video conferencing improvement tool Maxine, and the Omniverse platform for collaborative 3D design and creative work.

What is a chip company like NVIDIA doing in the software business? Many companies tout the next-generation capabilities of their hardware, but the capability of a chip can be seriously crippled if it is not easily integrated into a larger computer system. SDKs are essential to unlock the full range of capabilities of a piece of hardware. Recent releases thus help encourage the adoption of AI systems using NVIDIA products, which in turn increases sales over time.

With a new addition to its suite of chips and a growing list of out-of-the-box software platforms built on it, NVIDIA’s traditional focus on high-end computer graphics is now at the intersection of AI. , cloud computing and other modern computers. evolutions in high growth mode. If it can bring Arm in-house (or just double the launch of new chips using the Arm architecture), NVIDIA says its annual addressable market will be around $ 250 billion and will continue to grow. For reference, NVIDIA has made just over $ 13 billion in revenue in the past 12 months.

This explains why stocks carry such heavy premium (the company has a market cap of over $ 330 billion at the time of writing this article). NVIDIA is still in high growth mode and has a lot of promise for the decade to come. It will be a mad rush along the way as the chip industry is cyclical, but it is quickly becoming the dominant player in meeting advanced technological needs.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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