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Nvidia Is to Intel What Salesforce Is to Oracle

Stocks in this article: NVDA INTC

NEW YORK ( TheStreet) -- Many companies change over time, and therefore warrant a fresh look.

When I was a little boy during the Cold War, Nokia's (NOK) product was studded winter tires. The company reinvented itself to become the world's leading cellular-phone maker, then collapsed under competitive pressure from BlackBerry (BBRY), Apple (AAPL) and Google (GOOG), and has now ended up being Microsoft's (MSFT) de-facto handset hardware arm.

Nvidia's transformation in the past three years has not been as radical as Nokia's, but needs to be understood better. It is also a transformation that is not yet over. Nvidia is three years into a transformation that will take another three years to complete. So you can view this write-up as a half-time report, if you will.

Nvidia has two basic business segments:

1. Graphics processors for PCs.

Most computer enthusiasts know Nvidia as the PC gaming graphics company. Traditionally duking it out against AMD (AMD), Nvidia is a leading supplier of graphics cards for both PC OEMs as well as the hobbyist custom after-market.

The past couple of years have seen an important addition to this traditional Nvidia graphics market, and that's the industrial market. All sorts of companies are using Nvidia's GPUs for computing-intensive tasks. Think "trains, planes and automobiles" -- a common use case for Nvidia's GPUs is for complex product design and engineering.

On its own, this market is already growing at a very healthy rate. However, 2013 will start the transformation of the industrial GPU market from "one GPU in every PC" to a cloud-based model.

The way to start thinking about why this is happening is by way of analogy: At various stages over the past 15 or so years, computing tasks have moved from the local processor to the cloud. It started with web-based email, such as Yahoo (YHOO), taking on Microsoft Outlook, and then Google Docs took on Microsoft Office. (CRM) took on Oracle (ORCL) and SAP (SAP).

These are all the same thing, in principle: Instead of buying the most expensive hardware for each and every person, you can "rent" shared server space in a remote location. When you go on vacation or travel, you don't build a new house to sleep every night -- you rent a hotel room. It's far more economical.

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