NVIDIA Partners with VMware, Brings AI-Boosting GPUs


Aug. 27 2019, Published 12:36 p.m. ET

Chipmaker NVIDIA (NVDA) is teaming up with VMware (VMW) and Amazon (AMZN) to speed up artificial intelligence (or AI) tasks. On Monday, NVIDIA announced that it would release accelerated GPU technology for VMware Cloud on Amazon’s cloud division, AWS (Amazon Web Services).

The new virtual GPU technology would help the joint customers of NVIDIA and VMware streamline their workflows. However, the companies have not disclosed the release date of the software.

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NVIDIA to release new GPU technology

The company’s new software would be called vComputeServer, which would support the AI needs of large businesses using AWS. This technology would allow customers to move VMware vSphere-based applications to the cloud easily. Customers would also access high-performance computing, machine learning, data analytics, and video processing applications.

As a leader in the discrete GPU market, NVIDIA has emphasized GPU-accelerated computing to meet the AI needs of large businesses. NVIDIA’s GPUs help companies make accurate predictions and streamline AI tasks.

Along with VMware, NVIDIA is bringing high-performance GPUs to the hybrid cloud infrastructure to meet the various AI needs of enterprises. This new software would also support existing workflows and would also help lower overall operational costs, according to Reuters’ August 26 report.

NVDA and its peers: AI strategy

NVIDIA’s AI-focused chip supplies GPUs along with CUDA software support that can be used in any AI application. The chipmaker is also exploring newer markets to boost its artificial intelligence strategy. NVIDIA has also partnered with large enterprises to support their AI needs. The company expects its data center artificial intelligence TAM (total addressable market) to reach $50 billion by 2023.

NVIDIA’s peer Intel (INTC) develops its chips in-house, which gives it improved control over its technology. Intel has developed Xeon CPU, Optane memory, Altera FPGA, and interconnect chips, and it’s currently in the process of developing its Xe GPU.

During last week’s Hot Chips 31 Symposium, Intel announced that it would launch its dedicated Nervana AI chips for DLT (deep learning training) and DLI (deep learning inference). Intel expects its DLT and DLI TAM to reach $46 billion in 2020.

However, Advanced Micro Devices (AMD) doesn’t have a dedicated AI chip, and the company hasn’t released any TAM for deep learning. Despite this, AMD CEO Lisa Su is confident that the company would become a significant player in the artificial intelligence space.

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NVDA stock is gaining momentum

NVIDIA stock has been on an uptrend amid the escalating US-China trade war fears and the fallout from the crypto bubble burst. On August 26, NVDA stock had gained 24.2% year-to-date. In comparison, the S&P 500 increased 14.8% YTD. The VanEck Vectors Semiconductor ETF (SMH) was also up about 27% year-to-date. Notably, institutional investors have increased their stakes in NVIDIA.

To maintain its growth momentum, NVIDIA is focusing on high-demand markets such as automotive, artificial intelligence, data center, and professional visualization. The company is also working to revive its gaming business, which has grappled with sluggish sales in the last three quarters.

The company believes that demand for laptop GPUs and game console processors should boost its gaming revenues. NVIDIA’s launch of its GeForce RTX Super graphic cards should also improve the gaming experience.

The company recently partnered with software maker Microsoft (MSFT), which is expected to boost its gaming business. Through this deal, NVIDIA plans to offer its RTX ray-tracing technology to Microsoft’s video games. However, NVIDIA faces stiff competition from AMD in the gaming space. Both AMD and NVIDIA have unveiled numerous GPUs for the gaming sector, and AMD plans to launch its new PC GPUs next year.

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Analysts expect NVIDIA to return to growth in fiscal 2021 and for its sales improve by 19.7% YoY in fiscal 2021. This trend contrasts with an anticipated decline of 8.1% for fiscal 2020, which ends in January. Analysts also expect NVIDIA’s earnings to significantly increase by 31.4% YoY in fiscal 2021, in comparison to the anticipated decline of 18.4% YoY in fiscal 2020.

NVIDIA’s technical levels

NVDA stock closed at $165.45 on August 26, and it’s trading 3.2% above its 20-day moving average of $160.3. Its stock is trading 1.7% above its 50-day moving average of $162.71 and 0.7% above its 100-day moving average of $164.33.

The stock’s 14-day RSI (relative strength index) score is 52.54, indicating that investors are neutral on the stock. An RSI level above 70 means that a stock is in “overbought” territory, while an RSI score below 30 is in “oversold” territory. On August 26, NVIDIA stock closed near its Bollinger Band midrange level of $160.75. This value indicates that the stock isn’t oversold or overbought.

Analysts’ recommendations

Of the 40 analysts tracking NVIDIA, 26 analysts gave the stock a “buy” rating. Twelve analysts rated NVIDIA as a “hold,” and two analysts gave the stock a “sell” rating.

Analysts expect a 12-month price target of $184.25. This price target indicates that NVIDIA stock is trading at a discount of 10.2% to average analyst estimates.


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