NVIDIA, a leading technology company known for its GPUs and AI solutions, has released its financial report for the second quarter of FY2024, unveiling impressive figures in its data center business.
The report indicates that the company’s data center division achieved a staggering $10.32 billion in revenue, marking a remarkable quarter-on-quarter growth of 141 percent and a year-on-year increase of 171 percent. This exponential growth has heightened the company’s optimism about its future prospects.
The driving force behind NVIDIA’s remarkable revenue surge is believed to be its data center’s AI server-related solutions. Key products like AI-accelerated GPUs and the AI server HGX reference architecture have played a pivotal role in establishing NVIDIA as a foundational player in AI infrastructure for large data centers.
Industry analysts at TrendForce anticipate that NVIDIA will further consolidate its software and hardware resources. The company is expected to strategically align its high-end, mid-tier, and entry-level GPU AI accelerator chips with Original Design Manufacturers (ODMs) and Original Equipment Manufacturers (OEMs), fostering a collaborative system certification model.
This approach is poised to expedite the deployment of Cloud Service Provider (CSP) cloud AI server infrastructures. Additionally, NVIDIA’s collaboration with entities such as VMware on solutions like the Private AI Foundation is projected to extend its reach into the edge enterprise AI server market, fueling steady growth in its data center business over the next couple of years.
NVIDIA’s Data Center Business Dominates Market Share, Fueled by Cloud AI Demand
In recent years, NVIDIA has been diligently expanding its data center business. Initially trailing its gaming segment, data center revenue has surged, overtaking gaming revenue. This shift has been accelerated by significant investments from major CSPs in AI services and ChatBOTS for public cloud infrastructures. As a result, NVIDIA’s data center revenue share has surged to over 76 percent in the latest fiscal quarter.
NVIDIA Targets Both Cloud and Edge Data Center AI Markets
TrendForce’s observations reveal a strategic shift in NVIDIA’s approach to high-end GPU products in the latter half of 2023. While the company has traditionally focused on top-tier AI servers equipped with A100 and H100 GPUs, positive market demand is expected to drive NVIDIA to prioritize the higher-priced H100 GPU, effectively boosting its data center-related revenue growth.
At the same time, NVIDIA is emphasizing its L40s GPU as a flagship product for mid-tier applications. This shift is underpinned by its use of GDDR memory, allowing for rapid deployment to the mid-tier AI server market. The L40s GPU is tailored to enterprise customers with needs that may not require the high parameter counts of larger models like ChatGPT. It is expected to excel in compact AI training applications and edge AI inference tasks. Moreover, the L40s could serve as an alternative solution in regions where geopolitical factors might disrupt the supply of high-end GPUs.
HGX and MGX AI Server Reference Architectures Drive NVIDIA’s AI Solutions Strategy
NVIDIA’s strategy extends beyond refining its core AI chip GPU. The company is actively promoting its HGX and MGX solutions, capitalizing on its integration of GPU and CUDA platform to establish a comprehensive AI ecosystem. This strategy has positioned NVIDIA with considerable influence over server supply chains, encouraging ODMs and OEMs to adopt NVIDIA’s reference designs. However, they must undergo a hardware and software certification process. By bundling integrated solutions, including Arm CPU Grace, NPU, and AI Cloud Foundation, NVIDIA aims to expand its AI business aggressively to Tier-2 data centers and edge enterprise clients.
Despite its success, NVIDIA faces intensifying competition from CSPs adopting in-house ASIC AI accelerator chips. To counter this, NVIDIA continues to diversify its GPU offerings and comprehensive solutions, aiming to penetrate Tier-2 data centers and edge enterprise markets.
