Nvidia has signed a $9 billion deal to acquire cloud services in the battle for end customers!
NVIDIA's Chief Financial Officer Colette Kress stated in the financial report that cloud computing investments will help support NVIDIA's DGX Cloud. By leasing computing power from cloud service providers, NVIDIA can sell its own developed AI software, representing a potential revenue opportunity of $300 billion
Despite holding the position of "gold digger" in the AI boom and being the world's third-largest technology giant by market value, Nvidia is not satisfied with this. Last week, Nvidia announced a whopping $9 billion investment plan, aiming to grab a share of the cloud services market.
This massive investment plan mainly revolves around cooperation with major cloud service providers such as Amazon, Microsoft, Google, and Oracle. It is understood that Nvidia's previous committed investment in cloud computing services was about $3.5 billion, and the newly announced investment amount is several times higher.
Nvidia is expected to spend over $1 billion on cloud services annually for customers who purchase their GPUs
Nvidia did not disclose specific contract terms. According to reports, such cloud service contracts typically last 5 to 7 years. Even with the longest calculation of 7 years, Nvidia's annual spending in the field of cloud computing will exceed $1 billion, making it a top cloud service customer in the industry.
Why is Nvidia suddenly increasing its investment in the cloud computing field? In addition to supporting internal research and development, it is more important to win additional market share for its proprietary cloud service DGX Cloud. Last week, Nvidia's CFO Colette Kress stated in the financial report that cloud computing investments will help support Nvidia's DGX Cloud.
Nvidia's DGX Cloud service relies on AWS, Microsoft Azure, Google Cloud, and Oracle, so it is currently unclear which suppliers will benefit from Nvidia's increased cloud computing spending.
This business model sounds a bit strange, Nvidia first sells chips to AWS and other cloud service providers, then leases servers to these cloud service providers using their own chips, and then rents out this computing power at a premium to their own customers.
Some tech media have referred to Nvidia's strategy as a "Trojan Horse" - on the surface, it seems like a generous move to support GPU buyers, but behind the scenes, it may be poaching customers from traditional cloud service providers.
Nvidia is not content with just hardware
During an earnings call in August last year, Nvidia's CFO stated that the annual revenue from software business is in the hundreds of millions of dollars, which is just a drop in the bucket compared to the chip business. But they are ready for growth. By leasing computing power from cloud service providers, Nvidia can sell its own developed AI software. The company estimates that this represents a potential revenue opportunity of $300 billion.
For cloud service providers, while Nvidia's investment represents stable income, it also weakens their own influence. Customers who originally purchased AI services from AWS, Microsoft, Google, and Oracle may shift towards Nvidia A professional who has worked at AWS and Google Cloud commented to the media last year:
DGX Cloud places NVIDIA's brand at the forefront and center of cloud service brands. NVIDIA is aware of its position in the market and what needs to be done to maintain this position.
In fact, NVIDIA's relationship with cloud giants such as Amazon and Microsoft has always been a delicate balance of cooperation and competition. On one hand, these cloud providers need to purchase NVIDIA chips to build data centers and rent computing power to end customers such as ServiceNow and Amgen. On the other hand, these cloud giants are also developing AI chips on their own, trying to reduce their dependence on NVIDIA.
S. Somasegar, Managing Director of S.Madrona Ventures, believes that NVIDIA is not content with just being a hardware company and hopes to generate more revenue from cloud providers renting its chips.
He believes that in the future, in addition to selling chips, NVIDIA will actively expand revenue sources such as software and services. After all, customers pay huge fees to Amazon and Microsoft for renting NVIDIA chips in the cloud, and NVIDIA hopes to get a share of that.
NVIDIA has already started selling AI software to customers including Adobe, Getty Images, and Shutterstock, who are using NVIDIA's software to develop artificial intelligence models