Nvidia’s bet on deep learning and autonomous cars drives stock to record highs

Thinking Highways
By Thinking Highways August 12, 2016 20:43

Nvidia’s bet on deep learning and autonomous cars drives stock to record highs


Nvidia has been a leader in producing the technology behind high-quality graphics for years, but the company’s bet on a different future has taken it to new heights on Wall Street.

Nvidia Corp. surprised investors with a better than expected second quarter earnings and outlook Thursday, fueled by sales of its new graphics processor family, as well as chips to data centers. The company’s core gaming-processor business, which saw a jump of 18% to $781 million in revenue, made up about half of Nvidia’s NVDA, -0.06% total revenue of $1.43 billion in the quarter.

Chief Executive Jen-Hsun Huang, though, spent an equal amount of time on the company’s conference call discussing the growth in its far-smaller data center business and his investment in deep learning, pointing to the future of the business.

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“One particular dynamic sticks out, and it’s a very significant growth driver of where we have an extraordinary position in and it’s deep learning,” Huang told analysts in a conference call that lasted almost 80 minutes. “The last five years, we’ve quietly invested in deep learning because we believe that the future of deep learning is so impactful to the entire software industry, the entire computer industry that we, if you will, pushed it all in.”

Nvidia’s shares have been helped by its next-generation investments, hitting all-time highs in Tuesday trading. The stock jumped again in after-hours trading, gaining more than 2%.
Nvidia’s gaming business was buoyed by rollouts of new chips designed around its Pascal architecture, with virtual reality also providing a bit of a boost because of that technology’s the need for the type of high-performance computing power in which Nvidia specializes. Huang also noted that there is huge room for upside among its installed base of 80 million active users that have yet to upgrade to new systems.

Nvidia said its data center business saw revenue double from the year-ago quarter, to $151 million, half of which is deep-learning systems. Huang attributed much of that growth to its focus on developing chips that can power the mining of big data and deep learning, which companies can use to enhance their internet-based software applications and services to make them much smarter.

Nvidia’s sales to data centers are still a drop in the bucket compared with rival Intel Corp.’s INTC, -0.32% data center business. Intel reached $4 billion in revenue in the second quarter, but grew at a rate of only 5%. In an unusual comment, Huang gave Intel’s core processors a shout-out during the call, noting that Intel makes the best central processing units for the data center and that its Xeon processors were hard to beat for most data centers. Intel has also invested in deep learning: Earlier this week, the chip maker said it would buy Nervana Systems, a deep-learning startup, for the next wave of corporate computing.

Investors were also intrigued by Nvidia’s focus on developing chips for autonomous vehicles. Nvidia’s $119 million in auto sales, up 68% year-over-year, was driven by sales of infotainment systems inside vehicles. But the company said it has shipped what it calls its automotive supercomputer to 80-plus companies using both its hardware and DriveWorks software to develop autonomous-driving technologies, in limited production.

“We have the intentions of shipping in volume production many of these, and it’s hard to know exactly what everybody’s schedule is,” Huang said, adding that it ranges from very soon to the next couple of years. “Developing a self-driving car is…a fairly significant undertaking.”

For now, PC gaming platforms are still the core of Nvidia’s business. But the company appears to be making good bets for the future in deep learning and autonomous vehicles, and Wall Street is following along.

Thinking Highways
By Thinking Highways August 12, 2016 20:43