Nvidia acquisitions open up AI opportunities

Nvidia in AI

Alan Weckel, an analyst at market research company 650 Group, said he expects Nvidia to double down on the infrastructure market for AI applications. Microsoft, Google and Facebook tap AI for online advertising and monitoring user behavior. Analysts expect the AI infrastructure used by the tech giants to eventually find a home in enterprises that want to use AI to improve business operations and customer service.

"Given they're a strong company financially, now is a good opportunity to place its [AI] bets," Weckel said of Nvidia.

AI applications, which process vast amounts of data, need high-performance computing and storage systems. Nvidia has designed processors for those systems, while Mellanox has targeted them with programmable network interface cards. Cumulus' contribution would be its network operating system and its network analysis software called NetQ.

Nvidia could build complete AI systems for the cloud and enterprise data centers, Weckel said. Rival Intel is moving in a similar direction through its partnership with Nutanix, a maker of hyperconverged infrastructure systems.

"You can see that battle forming," Weckel said.

Nvidia's dive into cloud networking makes it a possible future threat to Arista and Cisco. But Nvidia needs several years to build products with the maturity of the other companies.

In the meantime, Mellanox will continue competing with Cisco in the HCI market. Nvidia will have less of an impact on Arista. The latter is focused on expanding in the markets for data center interconnects and switches for carrier-operated metropolitan area networks, Weckel said.

"They're really, at this point, frenemies," he said. "They're not directly competing."

Arista, Cisco focus on Sonic

Meanwhile, Arista and Cisco continue to add products for cloud providers. Arista said this week it would release in the second half of the year Sonic-powered switches within its 7050X and 7060X portfolios. Cisco, on the other hand, announced late last month that it would offer Sonic on its 8000 series routers.

 Microsoft is the primary user of the OS today. The company has handed over the development of the software to the Open Compute project, which plans to add features that will eventually make the OS useful to a broader market. 

"Sonic is making notable headway in both tier-2 clouds as well as the hyperscalers," said Brad Casemore, an analyst at IDC.

The COVID-19 pandemic has significantly reduced projections for overall IT spending globally. But revenue from IT infrastructure sold to cloud service providers is growing, according to IDC.

The analyst firm expects service providers and enterprises to spend $237 billion on cloud infrastructure this year, a 4% increase from 2019. The increase reflects an enterprise focus on cloud services to offset a reduction in the money available for capital expenditures.

Revenue from cloud technology is the exception. IDC's latest forecast is for IT spending overall to fall 5.1% to $2.25 trillion.