Nvidia has been a gaming company for a long time, and it has always tied its revenues and business to its gaming hardware.
But, that’s now changing as the company is seeing profits in its artificial intelligence (AI) segment as well. Over the last year and a half, Nvidia realized that it can go beyond its traditional gaming business.
These efforts are evident in the first quarter results of its 2018 fiscal year. In fact, its traditional gaming business performed less than expected. It earned a revenue of only $1.03 billion against the average forecast of $1.13 billion.
During this same time, its data-center business saw a big boost in revenue. It reported an earnings of $400 million, which is close to what the company earned in the entire fiscal year of 2016. This goes to show the growth of its data center business over the last one and half years. Besides its data center, its self-driving and automation division also saw a big jump in revenue.
A deep analysis reveals some interesting trends for the company. Firstly, it’s moving away from its core business slowly and steadily, as the loss in its gaming division was made up by the buoyant revenue from its AI and data center divisions. In fact, this expansion into other areas was given a big thumbs-up by the investors. As soon as the results were announced, the stock price of Nvidia went for a joy ride.
Secondly, the company’s move came at a right time when cloud computing companies are vying with each other to woo customers. In the process, they want to offer products with faster processing speeds. This requires chipsets with advanced deep learning and AI technology, something that Nvidia was able to cater to.
A press release by the company said that it attributed much of its efforts in cloud due to the adoption of its chipsets by some of the largest companies in the world such as Amazon Web Services (AWS), Alphabet Inc, Microsoft, Facebook, IBM and Alibaba Group Holding.
If you’re wondering what’s special about Nvidia’s chipsets, well nothing actually.
The Graphics Processing Units (GPUs) were initially being used for 3D rendering and for gaming. Soon, cloud companies realized that the same chip can be used for other processes too as they have high processing power. So, they were adopted by these companies to increase their computing power and that’s how Nvidia’s GPUs became a much sought after product.
Going forward, almost every major cloud provider is looking to standardize the use of GPUs, and this is definitely good news for Nvidia. For its investors and management, it means another few years of bounty results and less dependence on the changing gaming industry. One of the drawbacks of the gaming industry is that it is cyclical, with sales soaring through the holiday season, but remaining subdued through the rest of the year. This move to the cloud means the company can no longer worry about it.
Once again, these results and trends show the over-reaching impact of cloud technology across all companies and it also affirms the fact that cloud is the driving technology of the future.