AI: Nvidia’s formidable Software Moat. RTZ #445

🌈 Abstract

The article discusses why Nvidia is not just a "chip" company, but rather a formidable software company with impressive "moats" in the AI tech wave. It examines Nvidia's strategy of combining hardware and software to create an AI "operating system" that provides a significant competitive advantage.

🙋 Q&A

[01] Nvidia's Position in the AI Tech Wave

1. Why is Nvidia not just a "chip" company?

• Nvidia has managed to achieve software-like margins of over 80%, unlike typical hardware companies that are prone to commodification.
• Nvidia's success is due to its founder/CEO Jensen Huang's strategy of architecting and executing an "AI Accelerated Computing" approach that is as much about software as it is about hardware.
• Nvidia has built a "walled garden" or "software moat" through its CUDA platform and hundreds of open-source software "kernels" across various industries, making it difficult for competitors to shift away from Nvidia's ecosystem.

2. How has Nvidia become an "AI Operating System" company?

• Nvidia provides the "gunky stuff" between hardware and software, acting as the "MS-DOS of the AI age" by enabling a wide array of third-party applications and developers to leverage its hardware and software platforms.
• Nvidia has over 300 code libraries, 600 AI models, and supports 3,700 GPU-accelerated applications used by more than 5 million developers at 40,000 companies, creating a deep and broad software ecosystem.
• Nvidia sells entire AI data center "superclusters" with interconnected hardware and software, rather than just individual chips, further strengthening its position as an AI platform provider.

[02] Nvidia's Long-term Strategy and Competitive Landscape

1. How has Nvidia been playing the "long game" in AI?

• Nvidia's CEO, Jensen Huang, recognized the importance of AI and "AI eating software eating the world" before many others, positioning the company to lead the AI revolution.
• Nvidia has been empowering the AI "Transformer" software revolution, collaborating with companies like OpenAI, Microsoft, and Google.
• Nvidia has been developing its "AI Accelerated Computing" roadmap to accelerate computing beyond Moore's Law, with plans for "AI Factories" to take AI data centers to the next level.

2. How is Nvidia's competitive landscape evolving?

• Nvidia's competitors, both big tech companies and smaller players, are racing to develop software and mechanisms to penetrate Nvidia's emerging AI "operating system" and ecosystem.
• However, Nvidia's deep software integration and the difficulty of shifting away from its established platforms make it challenging for competitors to dethrone Nvidia as the "king of AI" in the near future.