Shares of Nvidia (NVDA) are moving higher today as the company hosts its Annual Investor Day and provided a ton of positive updates for investors to get excited about - though it is causing some added pressure on shares of Intel (INTC) and Advanced Micro (AMD) . Given the sheer volume of updates provided today, we are providing a high-level view (with links) on most of the more notable announcements and will add additional commentary on those we believe to be the most material for investors and speak to the action being seen in NVDA as well as INTC and AMD.
For starters, the company announced the general availability of NVIDIA Omniverse Enterprise, "the world's first technology platform that enables global 3D design teams working across multiple software suites to collaborate in real time in a shared virtual space." The news comes at what is arguably an inflection point for work environments as more companies rush to figure out what the future of work will look like and weigh the implications of bringing employees back into centralized offices or the potential benefits of implementing permanent remote/hybrid work policies or even satellite offices that allow for both in person collaboration and the benefits of a less centralized office (think less commuting for employees and cheaper real estate for employers).
Separately, while NVIDIA is still working on the regulatory approval required to acquire Arm Holdings, the company is not standing by idly as management announced "a series of collaborations that combine NVIDIA GPUs and software with Arm®-based CPUs - extending the benefits of Arm's flexible, energy-efficient architecture to computing workloads from the cloud to the edge." Two notable collaborations on this front are with portfolio holdings Amazon (AMZN) and Marvell (MRVL) . Starting with Amazon, the two "are working together to deploy GPU-accelerated Arm-based instances in the cloud. The new Amazon EC2 instances will bring together AWS Graviton2 processors and NVIDIA GPUs to provide a range of benefits, including lower cost, support for richer game-streaming experiences, and greater performance for Arm-based workloads." As for Marvell, the company is expanding its existing collaboration efforts to combine Marvell OCTEON DPUs with Nvidia GPUs to "accelerate cloud, enterprise, carrier and edge applications. This combination will speed up AI workloads such as network optimization and security from the edge to cloud, boosting system performance and reducing latency."
On the release, Marvell CEO Matt Murphy commented: "Marvell's Arm-based OCTEON DPU platform has a long, proven track record of delivering industry-leading solutions to address the growing security, networking and storage requirements of cloud data centers. We're thrilled to expand our multi-year relationship with NVIDIA to combine our OCTEON DPUs with NVIDIA GPUs to accelerate video analytics and cybersecurity solutions for emerging edge to cloud applications."
Perhaps the most exciting news of the day, and what is no doubt causing the bulk of the pressure we are seeing in shares of INTC and AMD, NVIDIA announced its first Arm-based data center CPU, which management noted "will deliver 10x the performance of today's fastest servers on the most complex AI and high performance computing workloads." Per the announcement, "the NVIDIA Grace™ CPU is designed to address the computing requirements for the world's most advanced applications - including natural language processing, recommender systems and AI supercomputing - that analyze enormous datasets requiring both ultra-fast compute performance and massive memory."
While both AMD and INTC are trading lower on the news, we believe this to be something of a "shoot first, ask questions later" move and think that while it does increase competition for both, the news is not all that surprising given NVIDIA's ongoing effort to acquire Arm. Ultimately, while we understand the move, we think the strong and ongoing execution AMD has demonstrated on its stated roadmap will allow it to continue to gain market share in the near and mid-term at Intel's expense and that longer-term both NVIDIA and AMD can increase their respective shares of the CPU market. Today's news does not change our long-term view of AMD and only serves to strengthen our already positive long-term view of NVDA.
On the release, CEO Jensen Huang commented: "Leading-edge AI and data science are pushing today's computer architecture beyond its limits - processing unthinkable amounts of data. Using licensed Arm IP, NVIDIA has designed Grace as a CPU specifically for giant-scale AI and HPC. Coupled with the GPU and [data processing units) DPU, Grace gives us the third foundational technology for computing, and the ability to re-architect the data center to advance AI. NVIDIA is now a three-chip company."
Speaking of DPUs, NVIDIA unveiled its next-generation NVIDIA DGX SuperPOD, which features the company's BlueField-2 DPU and is "the world's first cloud-native, multi-tenant AI supercomputer." That said, perhaps even more exciting for investors, NVIDIA also announced its next-generation NVIDIA BlueField-3 DPU, which will "deliver the most powerful software-defined networking, storage and cybersecurity acceleration capabilities available for data centers." Per the announcement, "The first DPU built for AI and accelerated computing, BlueField-3 lets every enterprise deliver applications at any scale with industry-leading performance and data center security. It is optimized for multi-tenant, cloud-native environments, offering software-defined, hardware-accelerated networking, storage, security and management services at data-center scale. One BlueField-3 DPU delivers the equivalent data center services of up to 300 CPU cores, freeing up valuable CPU cycles to run business-critical applications."
Moving along, on the autonomous vehicle front, NVIDIA unveiled "its next-generation AI-enabled processor for autonomous vehicles, NVIDIA DRIVE™ Atlan, which will deliver more than 1,000 trillion operations per second (TOPS) and targets automakers' 2025 models." On the release, the company noted that "DRIVE Atlan will include NVIDIA's next-generation GPU architecture, new Arm CPU cores, as well as deep learning and computer vision accelerators. This data-center-like performance provides automakers ample compute capabilities to build software-defined vehicles that are richly programmable and perpetually upgradeable through secure, over-the-air updates." In a separate blog post, the company called Atlan a "veritable data center on wheels," noting that it "centralizes the vehicle's entire compute infrastructure into a single system-on-a-chip." Though the next-generation chip platform will not be available for a couple for years, "software development is well underway" and most importantly "software compatible with previous DRIVE compute platforms, allowing customers to leverage their existing investments across multiple product generations." Members should note that this backward compatibility also provides a deep competitive moat for the company as users of prior generations will stick with NVIDIA for each subsequent upgrade.
While the aforementioned announcements are arguably the most important from an investment perspective, management provided several other noteworthy updates. Speaking to the ways in which semiconductors and artificial intelligence are penetrating every industry on the planet, the company called out collaborations with AstraZeneca (AZN) and the University of Florida's academic health center, UF Health, noting that "NVIDIA Clara Discovery aims to give researchers tools needed to discover promising pharmaceuticals faster." Moreover, the company announced "a strategic partnership with Schrödinger (SDGR) that harnesses NVIDIA DGX A100™ systems to further expand the speed and accuracy of Schrödinger's computational drug discovery platform and enable rapid, accurate evaluation of billions of molecules for potential development of therapeutics."
The company also announced the availability of the NVIDIA Jarvis framework which will provide developers "with state-of-the-art pre-trained deep learning models and software tools to create interactive conversational AI services that are easily adaptable for every industry and domain." On the cybersecurity front, management announced the NVIDIA Morpheus application framework, "which provides cybersecurity partners with a complete suite of accelerated AI skills that detect and prevent security threats as they happen. NVIDIA Morpheus is a cloud-native cybersecurity framework which uses machine learning to identify, capture and take action on threats and anomalies that were previously impossible to identify, including leaks of unencrypted sensitive data, phishing attacks and malware."
Last but not least, CFO Colette Kress added on the call that FY1Q22 revenue is tracking above the companies previously provided guidance of $5.3 billion +/- 2%, which as we noted in our prior earnings analysis, was already a blowout versus expectations of ~$4.5 billion. In an associated press release, Kress commented, "while our fiscal 2022 first quarter is not yet complete, Q1 total revenue is tracking above the $5.30 billion outlook provided during our fiscal year-end earnings call. We are experiencing broad-based strength, with all our market platforms driving upside to our initial outlook." Shares were already advancing on the slew of product announcements, however, took another leg higher on the guidance commentary as consensus coming into the event was for revenue of $5.32 billion.
Kress went on to comment, "Within Data Center we have good visibility, and we expect another strong year. Industries are increasingly using A I to improve their products and services. We expect this will lead to increased consumption of our platform through cloud service providers, resulting in more purchases as we go through the year. Our EGX platform has strong momentum, and we expect this will drive increased revenue from enterprise and edge computing deployments in the second half of the year. Overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean. We expect demand to continue to exceed supply for much of this year. We believe we will have sufficient supply to support sequential growth beyond Q1."
Believe it or not, these were not all of the announcements made today, however, we believe covers those most material to investors. For those interested in diving even deeper, a full rundown on everything announced today can be found here. It really was an amazing day for the company and our confidence in the team is as strong as ever! While we already had an idea of the potential for synergies should NVIDIA acquire Arm Holdings, we were impressed by the sheer magnitude of integration that NVIDIA already has in place with Arm-based products. We think this provides a great view into how synergistic the acquisition can ultimately be and continue to monitor for updates on this front such as regulatory approval.
Lastly, be sure to catch tonight's episode of Mad Money -- as you should every night of course -- because Jim will be providing his latest thoughts on everything announced at today's event.