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Nvidia Idea Proposal (NVDA)

Nvidia Idea Proposal (NVDA)
 

What are the roadblocks to Nvidia’s growth in AI-powered datacenters and self-driving cars?

Report Available: June 29, 2018

 

Blueshift’s initial research found NVDA outperforming expectations, led by its graphics cards and chips for gaming. NVDA is also leading the push to bring artificial intelligence applications to datacenters. But the ever-changing chip industry is rife with competition from familiar faces like INTC and AMD as well as start-ups with an AI focus. At the same time, NVDA is facing off against INTC to be the brains behind self-driving cars. NVDA’s recent success selling chips to cryptocurrency miners has given way to uncertainty in that market.

 

Observations

  1. NVDA delivered another blowout quarter in Q1 of its fiscal 2019, surpassing analyst expectations and posting a 66% year-over-year increase in revenue. Its surge was led by sales of graphics cards and chips for gaming, which represent 54% of the company’s revenue, as multi-player games like Fortnite and PUBG that require high-end hardware have become massively popular. NVDA also delivered strong results with sales for medical imaging, datacenters, and cryptocurrency mining.
  2. NVDA’s technology is at the forefront as datacenters transition from a reliance on central processing units (CPUs) to graphics processing units (GPUs). Major cloud providers like AMZN and GOOG/GOOGL, as well as large datacenter operators like FB, are increasingly moving toward artificial intelligence to power their operations, and NVDA’s Volta architecture has proven to be a high-powered and innovative solution. NVDA’s datacenter revenues climbed 71% in Q1 and now represent about 22% of the company’s total revenues. However, that impressive growth represents a deceleration from four consecutive quarters of more than 100% growth, and a bevy of other chipmakers have their eye on this market, which could hit $50 billion by 2023. INTC, with its Nervana Neural Network Processor, and AMD are potential threats, as are several smaller competitors, like XLNX. There is also some concern that the cloud providers themselves could develop internal solutions as GOOG/GOOGL has done with its TensorFlow Processing Unit.
  3. NVDA’s auto segment revenues grew by only 4% in Q1 as the company transitions away from infotainment solutions to what it considers a much bigger prize – autonomous vehicles. NVDA has pushed itself to the forefront of self-driving car development with its Drive PX system, which combines data from cameras, radar, sensors and other sources with an incredible eight teraflops of computing power. One analyst suggested NVDA’s auto business could generate $2 billion of revenue by 2022. But INTC is ceding no ground, especially after its $15.3 billion acquisition of MobileEye, a developer of cameras, sensors and software that has been a pioneer of Advanced Driver Assistance Systems. Both NVDA and INTC are feverishly working to shore up partnerships with automakers and tier-1 parts suppliers.
  4. NVDA enjoyed an unexpectedly strong Q1 for chips designed for mining cryptocurrency, such as Bitcoin. Revenues for such chips hit $289 million, but executives acknowledged that such growth is unsustainable and have forecast a decline of as much as two-thirds in the current quarter.

 

What are the biggest technical hurdles to increased use of NVDA chips in datacenters? Can any competitors slow NVDA’s growth in datacenters? Will cloud providers turn to custom in-house solutions? What are the key competitive issues for chips in self-driving vehicles? Will NVDA or INTC win the battle to be the brains behind autonomous cars? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Datacenter operators, Enterprise IT executives, Automakers and tier-1 suppliers, Chip designers, and Industry specialists.

 

Companies: Nvidia Corp. (NVDA), Advanced Micro Devices Inc. (AMD), Amazon.com Inc. (AMZN), Facebook Inc. (FB), Intel Corp. (INTC), Alphabet Inc. (GOOG/GOOGL), Xilinx Inc. (XLNX)

 

Research Begins: June 4, 2018

 

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