NVIDIA's Top Competitive Advantages, According to Its CEO
NVIDIA (NASDAQ: NVDA) turned in robust fiscal third-quarter 2018 results earlier this month. The graphics-chip specialist's revenue jumped 32%, GAAP earnings per share surged 60%, and adjusted EPS soared 41%.
On the Q3 analyst conference call, talk centered on competition. That's because other companies have, or are exploring, approaches to artificial intelligence (AI) to rival NVIDIA's graphics processing unit (GPU) based approach to deep learning. In addition, news out earlier this month that Intel poached Advanced Micro Devices' former graphics head strongly suggests that the former will enter NVIDIA's turf, the discrete GPU space. The chip behemoth surely wants a piece of the AI business that's been propelling NVIDIA's data-center platform to torrid triple-digit year-over-year revenue growth in recent quarters.
CEO Jensen Huang outlined two of NVIDIA's key competitive advantages:
1. Focus on one architecture
From Huang's remarks:
Huang commented further on this topic:
CUDA is NVIDIA's parallel computing platform and application programming interface. Thanks to CUDA, NVIDIA's GPUs can be used for general-purpose processing.
The benefits Huang outlined stemming from NVIDIA's having just one architecture, as opposed to multiple ones like its primary competitors, make good sense. The flip side of having all its eggs in one basket, of course, is that NVIDIA would run into huge trouble if its sole architecture fell out of favor for some reason. At this point, it looks like clear sailing at least through the intermediate term for NVIDIA's CUDA-enabled GPUs in AI and in high-performance computing.
2. Seven-year head start in GPU-based approach to deep learning
Huang believes that NVIDIA's seven-year head start in deep learning -- a category of AI that essentially trains a machine to think like we humans do -- is a significant competitive advantage. His below remark is in response to a question about Intel's expected entrance into the discrete GPU business:
Intel has deep pockets and it now has a graphics head with deep experience at AMD, NVIDIA's arch-rival in discrete GPUs, but I agree with Huang that NVIDIA's big head start gives it a powerful competitive advantage.
The italicized sentence: The reference is to NVIDIA's newest GPU architecture, Volta, released earlier this year, as being 100 times faster than Kepler, its GPU architecture from four years ago, according to the company. Huang has previously said that Kepler was already 10 times faster than central processing units.
Lastly, NVIDIA has another important competitive advantage worth mentioning: It's run by a founder-CEO. Success for a founder is more than about money, so it's not surprising that a growing number of studies show that founder-led companies outperform in the stock market.
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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.