NVIDIA’s Data Center segment
NVIDIA (NVDA) is expected to see temporary weakness in its Gaming segment in the third fiscal quarter of 2019 as the company transitions to the next-generation gaming GPU (graphics processing unit). NVIDIA’s second-biggest segment is the Data Center segment. The company earns ~25% of its revenues from the Data Center segment. The Data Center segment is the company’s fastest growing business segment. The increasing adoption of AI boosted NVIDIA’s Tesla GPU sales.
The company expects the Data Center segment to be a $50 billion opportunity by 2023. The first $10 billion would come from its DGX supercomputers, the next $20 billion from hyperscalers, and the last $20 billion from cloud companies and the overall industry.
Data Center segment’s revenues
In the second fiscal quarter of 2019, NVIDIA’s Data Center segment’s revenues rose 83% YoY (year-over-year) and 8.4% sequentially to $760 million. The segment witnessed the fastest growth from vertical industries and strong demand from hyperscalers. Hyperscalers, like Internet service companies, are using NVIDIA’s GPUs more to perform AI workloads like voice recognition, language translation, and recommendation engines.
NVIDIA achieved a milestone by powering the world’s fastest supercomputer “Summit” in Oak Ridge National Laboratory with more than 27,000 Volta GPUs. Now, NVIDIA powers five of the top seven fastest supercomputers listed in the TOP500 supercomputer list.
The Data Center segment also saw strong demand for its DGX supercomputer.
Peers’ data center performance
Intel’s (INTC) data center revenues rose 6.1% sequentially during the June quarter. Advanced Micro Devices (AMD) witnessed a significant increase in its data center revenues. Advanced Micro Devices’ EPYC server processor revenues increased 50% sequentially during the quarter.
Advanced Micro Devices is poised to gain some server processor market share from Intel by the end of 2018. Advanced Micro Devices is also launching its seven nanometer Vega server GPUs for AI to compete with NVIDIA and gain some share in the server GPU market.
NVIDIA is expanding its data center offerings to various industry verticals, which we’ll discuss next.