Nvidia's Pursuit of AI Dominance: Filling the Gaps in Its Data Center Offering

As Nvidia (NVDA) looks to maintain its dominance in the AI data center market, the company may need to address some key gaps in its product lineup, according to a Wall Street analyst. This strategic move could be crucial in solidifying Nvidia's position as the industry leader in AI systems and networking.

Unlocking the Next Phase of AI Supremacy

Identifying the Gaps in Nvidia's Data Center Offering

Susquehanna Financial Group analyst Christopher Rolland has identified two "glaring holes" in Nvidia's data center offering: optical and analog networking. To address these gaps, the analyst suggests that Nvidia may need to consider making strategic acquisitions or developing these technologies in-house.

Nvidia's Vertical Integration Advantage

Nvidia's strength in the AI market stems from its vertical integration of semiconductor design, CUDA software, and holistic systems. This integrated approach has allowed the company to deliver cutting-edge solutions that cater to the growing demands of the AI data center ecosystem.

The Importance of Networking in Scaling AI Systems

As clusters of graphics processing units (GPUs) scale, the need for interconnections grows exponentially. Rolland emphasizes the critical role of networking in such systems, highlighting the potential for Nvidia to bolster its expertise in optical and analog networking technologies.

Potential Acquisition Targets

Rolland has identified several companies that possess the optical and analog networking technologies that Nvidia might be interested in acquiring or partnering with. These include Lumentum (LITE), Coherent (COHR), Applied Optoelectronics (AAOI), Semtech (SMTC), Marvell Technology (MRVL), MaxLinear (MXL), Macom Technology Solutions (MTSI), Credo Technology (CRDO), Intel (INTC), Lightmatter, and Ayar Labs.

Nvidia's Upcoming Processor Launches

Investors have been closely following the development of Nvidia's next-generation processors, known as Blackwell. According to technology analyst Tim Culpan, Nvidia is expected to start delivering the first racks of its GB200 servers to major cloud service providers in early December, about a month later than originally planned, but sooner than many had feared.

Nvidia's Top Customers for AI Chips

Culpan's analysis suggests that Microsoft (MSFT) will receive the largest allocations of Nvidia's most-advanced AI chips, followed by other top customers such as Amazon (AMZN), Meta Platforms (META), and Oracle (ORCL).

Nvidia Stock's Performance and Outlook

Nvidia stock is currently in a 15-week consolidation pattern, with a buy point of $140.76 according to IBD MarketSurge charts. However, IBD analysis offers an alternative buy point of $131.26. Nvidia stock is also featured on four IBD stock lists: IBD 50, Stock Spotlight, Leaderboard, and SwingTrader, indicating its strong market position and potential for future growth.