While it takes a lot of capital to engineer circuitry in-house, these companies have enough spare cash flow for this route to actually make more sense than purchasing from, say, Nvidia.īut there's a catch. They hold an extensive portfolio of chip designs. #NVDA FORECAST 5 YEARS SOFTWARE#Those tech giants turned into direct competition as they started to produce their own semiconductors for their products, like Apple's M1 processor.Īpple, along with Amazon and Google, all have licensed from ARM, a semiconductor and software design company. While that demand was great for semiconductor companies, it also presented a problem. Why Nvidia Has a Trump Card in the Chip Shortageĭemand for high-end computing boomed so much that semiconductor production couldn't keep up with demand. With all the growth in cloud software and AI, semiconductors felt the squeeze during the COVID-fueled demand spurred on by the work-from-home movement. The market is expected to expand at a compound annual growth rate (CAGR) of 40.2% from 2021 to 2028 - reaching roughly $930.72 billion by 2028. These supercomputers are designed to give users powerful tools for AI exploration.Īll of this opens the company up to be a benefactor of the global AI market, a market valued at $62.35 billion in 2020. It's limited to access by third-party use and lacks Recurrent Neural Network (RNN), which helps AI better recognize patterns in data.īut all the Nvidia-made GPUs are able to be purchased directly from the company and applied to hardware rather than just cloud infrastructure. Google's TPU (Tensor Processing Unit) was developed for neural network machine learning specific using Google's TensorFlow. To train and run AI systems, a process inspired by the way our brains function via a network of neurons called Deep Learning, they need to be top-notch. It's also worth noting that Nvidia is developing new cloud services of its own such as AI Enterprise and the Base Command Platform to go in direct competition with the tech giants, as well as Omniverse, a creative collaboration tool that leans on Nvidia's digital communication capabilities.Īrtificial intelligence (AI) systems also require fast and reliable processors. They need the fastest, most reliable processors available. That's why Microsoft's Azure Cloud, Google Cloud, and Amazon's AWS rely on those very same GPUs to perform data operations. That accounts for 36% of total sales for the company. In the first quarter of 2021, Nvidia generated a record high data center revenue of $2.05 billion, up 79% year over year. This pushed expectations for the global data center market to hit $117.82 billion by 2028 - a compound annual growth rate of 13.3% from 2021 to 2028.Īnd Nvidia's GPUs are at the heart of these data centers. COVID-19 fast-tracked demand for data centers due to the increased adoption of cloud services. Think of them as the brain of cloud services that keeps software and services running seamlessly. That's up from $270 billion in 2020.īut cloud-based software is nothing without the data centers. According to Gartner Inc., a tech research and advisory firm, spending on public cloud services is expected to grow 23.1% in 2021 to total $332.3 billion. If any good has come out of the pandemic, it's that we've seen the potential of cloud-based software and computing with the work-from-home movement. Why Nvidia's Cloud-Based Software Will Dominate This has allowed it to develop an expanding suite of cloud-based software. #NVDA FORECAST 5 YEARS PROFESSIONAL#Not only is Nvidia able to create powerful graphics processing units (GPUs) for the gaming and professional markets, as well as system on a chip (SoC) units for mobile computing and automotive market, but the company also pours a large amount of resources into research and development. Nvidia has an edge as it moves into cloud software and services. And that growth could see Nvidia stock jump 190% higher by 2025. Nvidia is a growing tech company that could one day rival tech giants like Inc. That's why our Nvidia stock forecast shows shares nearly tripling from here. Fortunately for investors, it is much more than a semiconductor company. If Nvidia were just a semiconductor manufacturer, the stock would be overpriced. Save my name, email, and website in this browser for the next time I comment. Sign me up for the Money Morning newsletter Your email address will not be published. Or to contact Money Morning Customer Service, click here. Comment on This Story Click here to cancel reply.
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