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Nvidia Is to Intel What Salesforce Is to Oracle

Stocks in this article: NVDA INTC

Salesforce.com would call this "software as a service" (SaaS). Nvidia is now taking this concept to the industrial GPU market, and it might be called "hardware as a service."

In order to attack this market, Nvidia is using multiple overlapping strategies:

First, Nvidia building its own cloud GPU appliance, which is sold in two base configurations -- $25,000 and $40,000, plus an annual license fee starting at $2,500.

Second, Nvidia is partnering with the leading server hardware companies: HP (HP), Dell (DELL) and IBM (IBM). They will be reselling Nvidia's solution starting this year.


Third, Nvidia is partnering with the leading server virtualization software companies: VMware (VMW), Citrix (CTXS) and Microsoft. They will be reselling Nvidia's solution starting this year.

Basically, all the largest and most relevant vendors are endorsing Nvidia's solution as the "hardware as a service" solution for heavy industrial GPU computing. I doubt HP, Dell, IBM, Microsoft, Citrix and VMware are doing this because their sales expectations are modest.

On the consumer gaming side, we should see an analogous development, Nvidia expanding the gaming market by processing the games in the cloud and delivering the experience as a service to a simpler process in a less expensive end-user device. You're already using web-based email and productivity such as Google Docs, so why not also games?

Why is this "hardware as a service" Nvidia strategy important? Why should we care? Ultimately, it's about the network making the service available to more people, at lower cost. Instead of outfitting big PCs with power-hungry Intel and AMD processors, we human beings really only need to be looking at a rich display in front of our faces. This could be so much cheaper if the device is as close as possible to being only a display with network connectivity, as opposed to an entire Intel computer glued to the display.

What this means is that Nvidia is now bringing supercomputer capability on a "cloud rental" basis to smaller and smaller companies. It's almost like the web-hosting business enabling start-ups such as Salesforce to quickly build up a business to compete with Oracle and SAP. I almost apologize for sounding lyric about this, thinking about Joseph Schumpeter's "gale of creative destruction" of capitalism, new business models rendering the old ones obsolete.

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