Is This NVIDIA’s Next Big Opportunity?

Gaming is NVIDIA's (NASDAQ:NVDA) biggest revenue source while the automotive business is said to be its next big play. Data center is the company's second-largest business, with over 13% of revenue, and it could continue to grow for two reasons: the deployment of more data centers and upgrades to the existing ones. NVIDIA's GPUs are powering major cloud service providers such as Amazon Web Services, Google Cloud, Microsoft Azure, and Softlayer. The company's client list in datacenters will continue expanding as global mobile data traffic is expected to grow eightfold from 2015 to 2020, driven by Internet of Things applications. Upgrades will drive GPU demand Cloud service providers have started upgrading their existing data centers to meet the rise in data volumes and tackle complexity. The NVIDIA GPUs were used to add a new virtual server, known as P2, to Amazon's data center. In this way, Microsoft is providing infrastructure-as-a-service (IaaS) to its clients by upgrading its existing data centers. This will increase the demand for NVIDIA's GPUs as they will be used to accelerate computing power and capacity in data centers to enable IaaS growth. Should Nvidia be on your buy list? The Motley Fool owns shares of and recommends Amazon and Nvidia.
A Tesla K80 GPU accelerator.
Image source: NVIDIA.

Gaming is NVIDIA‘s (NASDAQ:NVDA) biggest revenue source while the automotive business is said to be its next big play. However, the company’s data center business — which has Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) as clients — is putting both gaming and automotive to shame in terms of growth.

Image showing NVIDIA revenue trends in gaming, auto, and datacenter.
Data from NVIDIA. Chart by author.

The 205% year-over-year growth in NVIDIA’s data center revenue during the fourth quarter eclipsed both gaming and automotive, which reported “moderate” growth of 66% and 37%, respectively over the same time period. Data center is the company’s second-largest business, with over 13% of revenue, and it could continue to grow for two reasons: the deployment of more data centers and upgrades to the existing ones.

Data centers will need more GPUs

Nowadays, the type and volume of information that data centers process has become more complex than ever. The growing usage of 3D applications in virtualized workspace environments is creating the need for high-performance computing that is enabled by GPUs. Instead of deploying a 3D-graphics-enabled application on an individual workstation, enterprises are now using the data center to install the 3D apps so they can be accessed by users remotely.

Apart from the complexity, the volume of data processed in data centers is also rising thanks to concepts such as the Internet of Things.

The Internet of Things generates two categories of data. The first is the large data type that consists of images and videos generated by different electronic devices. The second is the passive or small data type that is generated by different sensors and low-energy devices powering the Internet of Things. As data centers handle both these data types, they will need upgraded GPUs to enhance computing speeds and control costs simultaneously.

As it turns out, NVIDIA’s Tesla GPUs for the data center deliver on both counts — faster speed and lower costs. These are capable of enhancing computing speeds by five times and reduce costs by 60%, according to Shanker Trivedi, the company’s VP of Enterprise Business. The advantages delivered by these GPUs have allowed the company to rack up an impressive clientele in datacenters, especially…

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