Semi holding Nvidia proves its a leader in AI software, expanding beyond chips

Published Wed, Mar 22 202311:39 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Nvidia 's (NVDA) annual technology developer conference this week has reinforced the Club's view that the chipmaker is fast becoming a software powerhouse through its artificial intelligence prowess. The semiconductor firm's electronic circuits known as graphics processing units (GPUs) have proven central to the proliferation of artificial intelligence (AI), which reached a tipping point late last year with the launch of OpenAI's viral chatbot, ChatGPT. But on Tuesday, Nvidia demonstrated its more than just a hardware company. The company officially launched its DGX Cloud , a supercomputer accessible via web browser that can be used to train models behind generative AI applications like ChatGPT. Nvidia also detailed a set of cloud services that make it easier for companies to build bespoke AI models for their respective businesses. "The world is absolutely ready for this because we want more productivity. We want to do more with less," Nvidia CEO Jensen Huang told CNBC Tuesday on the sidelines of the conference. Nvidia's new software offerings come at a pivotal moment for the company, which has seen its stock price soar more than 75% year-to-date on excitement around generative AI — programs that can create new content, such as text and images, in response to a user query. The huge gains have prompted a debate on Wall Street about whether Nvidia bulls are overhyping the company's AI opportunity. But we think Nvidia has a lot more room to run, and would look to add to our position on a future pullback. NVDA 1Y mountain Nvidia's stock performance over the past 12 months. New software products Since its founding 30 years ago, Nvidia's bread and butter has been hardware. But now, "software and services will be a very substantial part of our business," Huang said Tuesday. DGX Cloud is central to that strategy, making Nvidia's cutting-edge computing capabilities more accessible to enterprises and applicable to a wider range of industries. The reason is that not every company that wants to innovate using AI can afford to build an expensive supercomputer. DGX Cloud can solve that problem for companies, while providing Nvidia with a recurring revenue stream. DGX Cloud will first be available through Oracle 's (ORCL) cloud computing platform, starting at $36,999 per month. It's set to expand to Microsoft 's (MSFT) Azure cloud next quarter, followed by Alphabet 's (GOOGL) Google Cloud. Microsoft and Alphabet are Club holdings. Nvidia also detailed a set of services, known as Nvidia AI Foundations , which will be available through DGX Cloud. These provide companies with the tools needed to customize AI models. Meanwhile, Nvidia on Tuesday spotlighted carmaker BMW , which is using its 3D graphics platform, Omniverse, to connect remote teams around the world and build a digital version of a European electric vehicle factory. With this digital twin of the factory built, BMW can map out, test run and revise the floorplan in the digital world, saving time and money on the physical build-out. Huang said Tuesday that Club holding Amazon (AMZN) is also a customer, with the ecommerce giant using Omniverse to train its autonomous warehouse robot. And the chipmaker announced a new collaboration with Microsoft to bring an Omniverse software offering to Microsoft 365 applications like Teams. Hardware updates Nvidia announced Tuesday that Grace CPU — its first foray into designing central processing units for data centers — is now in production. With Grace, Nvidia is muscling its way into the CPU market, which had until now been dominated by Club name Advanced Micro Devices (AMD) and competitor Intel (INTC). Separately, Nvidia launched four new " inference platforms " designed specifically for large language models (LLMs) and generative AI workloads. While Nvidia's chips have been essential to training the models that power generative AI applications, the company is positioning itself to play a bigger role in what's known as inference, or the process of deploying those models for everyday use. The Club's take Nvidia's push to offer more services only strengthens our long-term view of the company for two primary reasons. Firstly, it provides a recurring revenue stream that's less prone to the boom-and-bust cycles inherent to semiconductor hardware sales. Secondly, Nvidia's software expansion makes its AI leadership directly applicable to more industries because its best-in-class technology will be easier to access. Nvidia is now addressing the needs of many industries at the software level, rather than only focusing on AI-specific researchers, or just helping the major cloud providers build faster data centers. This dynamic should not only further support top-line growth, but also help justify the company's premium valuation. Shares of Nvidia were trading up roughly 2.8% midmorning Wednesday, at around $269 apiece. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Nvidia CEO Jensen Huang

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Nvidia's (NVDA) annual technology developer conference this week has reinforced the Club's view that the chipmaker is fast becoming a software powerhouse through its artificial intelligence prowess.