Nvidia Corp. NVDA CEO Jensen Huang struck a bullish note on the GPU maker's prospects in the software segment. Huang's optimism stems from the fact that the world's leading AI chipmaker has hit $1 billion in annualized revenue run rate in its software and services segment.
What Happened: Huang said that Nvidia's stack of libraries makes its software offering a "fundamentally necessary" part of its accelerated computing platform, which is the cornerstone of his belief that the company will be "very successful in software."
Huang's comments were part of a conference call with analysts after Nvidia's fourth-quarter earnings. The GPU maker reported $22.1 billion in fourth-quarter earnings, beating the Street estimate of $20.62 billion, according to data from Benzinga Pro.
Huang said that its stack of libraries when put together, forms the "operating system for AI." Coupled with its AI chips, this makes it a complete "accelerated computing" offering that its customers can then subscribe to, like a MacBook or a Windows laptop.
"Software is fundamentally necessary for accelerated computing. This is the fundamental difference between accelerated computing and general-purpose computing that most people took a long time to understand," explained Huang, underscoring the importance of making AI chips and offering AI software to go along with them.
Essentially, Huang says that Nvidia's software team has taken over optimising, patching and tuning the software stacks for their clients. This allows their clients to focus on their product, while Nvidia offers them the services of a contract developer.
"The way we go to market with it is that think of that Nvidia AI Enterprise now as a run time like an operating system, it’s an operating system for artificial intelligence."
Huang thinks that "every enterprise in the world" will eventually run on Nvidia AI Enterprise. "This is going to likely be a very significant business over time. We're off to a great start."
Why It Matters: Nvidia is the pioneer in the field of AI chips – it holds a market share of over 70%, according to an estimate by analyst firm Omdia.
Its latest AI chip, the H100, is in high demand, and Huang says the company expects its "next-generation products to be supply constrained as demand far exceeds supply." This includes Nvidia's highly anticipated next-generation AI chip, the H200.
Analysts have sounded a bullish note, with Wedbush's Dan Ives calling Nvidia's fourth quarter a "Taylor Swift moment" for the industry. At the same time, Tesla Inc. investor Ross Gerber thinks the company is "wildly undervalued" despite a 225% surge in its stock price in the last one year.
NVDA Price Action: Nvidia stock closed at $735.94, up 9.07% during the last 24 hours, versus a 52-week range of $204 to $746, according to Benzinga Pro data.
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Photo courtesy: Nvidia Corp on Flickr
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