Nvidia (NVDA) isn’t the only chipmaker going after artificial intelligence, but its prowess in this technology is giving it a lock on the burgeoning market.
That’s according to Rosenblatt Securities analyst Hans Mosesmann, who, after the company’s graphics technology conference last week, said Nvidia is blowing past rivals with new products and technology advancements. “What Nvidia did with their announcements last week (at GTC) was to cause everyone, including Intel (INTC), but also startups, to re-examine their roadmaps,” said Mosesmann in an interview with Barron’s. "Nvidia has reset the level of performance.” (See more: Nvidia Halts Self-Driving Car Tests After Uber Mishap.)
While Nvidia has long been known as the graphics chip maker that powers gamers' computer systems, in recent years it has been aiming to diversify its business. One of those areas, the one which has Mosesmann so excited, is the data center segment, which increasingly relies on AI to collect and analyze the data companies are amassing. According to Barron’s, the data center business accounts for 21% of Nvidia's revenue or $606 million, more than double from a year ago. And with the company adding more-advanced technology to its data center offering thanks to AI both on the chip and software side, Mosesmann thinks it's changing the battle. (See more: AMD, NVIDIA at Risk on New Cryptocurrency Chip.)
“It’s classic Nvidia — they go to the limits of what they can possibly do in terms of process and systems that integrate memory and clever switch technology and software and they go at a pace that makes it impossible at this stage of the game for anyone to compete,” Mosesmann told Barron’s. “Everyone has to ask, Where do I need to be in process technology and in performance to be competitive with Nvidia in 2019. And do I have a follow-on product in 2020? That’s tough enough.”
The analyst noted that a lot of the Nvidia news coming out of its developer conference had nothing to do with chips but everything to do with the platform. That will make it difficult for a lot of the AI semiconductor startups to keep up. He foresees millions of dollars of fundraising rounds for the startups or their demise.
As for Intel, Mosesmann said its efforts in that area haven’t been too successful to date, pointing to its purchase of AI chip startup Nervana Systems, for which it paid $400 million for in 2016. “Nervana's first chip didn’t work, they had to go back to the drawing board. It was supposed to go into production one or two quarters ago, and then they [Intel] said, 'We have decided to just use the Nervana 1 chip for prototyping, and the actual production chip will be a second version,” said the analyst. “ People aren’t parsing what that really means. It means it didn’t work! Next year, if Nervana 2 doesn’t happen, they'll go back and do a Nervana 3.” Rosenblatt has a buy rating on Nvidia and a $300 price target, implying shares may gain more than 20 percent from recent levels.