NVIDIA's Data Center Business Is Crushing It

Artificial intelligence (AI) continues to be a key part of NVIDIA's (NASDAQ: NVDA) growth story and epic run-up over the past two years, and the graphics specialist's fiscal third-quarter earnings release last night only strengthened that narrative. The company's data center business was a major headline from the report, with revenue more than doubling to a record $501 million.

Data center sales are being driven by NVIDIA's newest Volta GPU architecture, which the company says offers 10 times the deep learning performance of the previous-generation Pascal architecture. The new Tesla V100 GPU started shipping in the second quarter and "ramped significantly" in the third quarter thanks to broad-based demand from server original equipment manufacturers and cloud infrastructure providers.

Two charts that show the data center business is executing

The data center results over the past few years speak for themselves. Revenue has soared in less than three years. Data center revenue was just $88 million in fiscal Q1 2016, for instance.

Beyond absolute dollars, the data center segment continues to become increasingly important to total sales, now accounting for about a fifth of the top line.

Two quotes that show the data center business is executing

On the conference call, CEO Jensen Huang made it clear that Volta has a long runway for growth. The biggest cloud infrastructure vendors -- including Amazon.com's AWS, Alphabet's Google Cloud, and Microsoft Azure -- have all announced support for Volta and plan on using the architecture for internal purposes as well as external cloud services. That subsequently spurs demand among all major makers of server equipment.

Huang noted, "And so I think we -- this ramp is just the first part of supporting the build out of GPU-accelerated servers from our company for data centers all over the world as well as cloud service providers all over the world."

The chief executive pointed out that these are "very large markets" that Volta is looking to address. Huang continued: "They're [cloud service providers] all racing to get Volta to their cloud because customers are clamoring for it. The OEMs are -- we've primed the pump with the OEMs, and some of them are sampling now and some of them are racing to get Volta to production in the marketplace. And so I think the foundation, the demand is there."

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