Nvidia (NVDA) CEO Jensen Huang is striving to turn the company into a data center powerhouse to capture a larger breadth of the artificial intelligence (AI) market. According to a Wall Street Journal report, Huang wants to offer not just the hardware (chips) for AI but also software, networking technology, and data center design services. Huang wishes to offer all data center-related solutions under one roof, making it convenient for customers to shop for all their AI needs from Nvidia.
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Huang’s vision comes as the semiconductor giant’s Q2 results and guidance failed to impress shareholders’ heightened expectations even after exceeding the Street’s estimates. The CEO also seems concerned about rival Advanced Micro Devices’ (AMD) $5 billion acquisition of ZT Systems, a data-center equipment designer and manufacturer.
As can be seen from the graph below, Nvidia earns a major portion of its revenue from data center customers. Hence, it is not surprising to see the CEO’s ambition to cater to the growing requirements of data center clients.
Three Vital Aspects of Huang’s Broadened Vision
To fulfill his broadened vision, Huang is focussing on these three vital aspects:
- Capitalize on Proprietary Software, CUDA – Huang seeks to capitalize on Nvidia’s own 17-year-old proprietary software, CUDA. The programming model enables developers to accelerate their computing tasks and research applications by accessing the power of Nvidia’s advanced GPUs (graphic processing units).
- Enhancing Investments in InfiniBand – Huang is investing resources in InfiniBand, an ultra-fast networking protocol. Nvidia acquired InfiniBand’s manufacturer Mellanox Technologies for $7 billion five years ago. Analysts suggest that InfiniBand is widely used for training AI models. Huang wants to leverage InfiniBand’s growing usage in AI.
- Supply AI-optimized Ethernet – Huang also intends to continue to serve the traditional data center players by building and supplying AI-optimized Ethernet networking solutions. According to Nvidia CFO Colette Kress, these Ethernet services could produce billions of dollars in revenue within the next year.
Overall, Huang’s vision is to encompass each aspect of the AI world, including hardware, software, and networking solutions. The intense competition in the AI market is pushing listed and private companies in and around the semiconductor industry to expand their portfolio of AI offerings.
Is Nvidia Stock a Good Buy?
Wall Street is indeed optimistic about Nvidia stock’s trajectory, as the company holds over 80% of the AI chip market. On TipRanks, NVDA stock commands a Strong Buy consensus rating based on 39 Buys and four Hold ratings. The average Nvidia price target of $151.79 implies 27.2% upside potential from current levels. NVDA shares have already gained 141% so far this year.
