22 Sep Industry Voices—Raynovich: Nvidia is now a network behemoth; incumbents should be nervous
The story of Nvidia’s rise to power is a fascinating one, rooted in savvy moves to take advantage of technology market shifts in the cloud. And now that Nvidia has pivoted into the networking and mobile chip market with a series of acquisitions—including Arm, Cumulus Networks, and Mellanox—large networking incumbents should be very nervous.
If you don’t believe me—check the internet. There’s already chatter that Broadcom, a major networking chip supplier, may stop support of a software developer’s kit (SDK) for Cumulus, which is a Nvidia property, according to Greg Ferro of Packet Pushers. Broadcom must be terrified.
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What’s the worry? Nvidia has made this series of deals over the last six months, culminating in the largest one—its announcement last week that it will acquire chipmaker Arm from Japan’s Softbank for $40 billion. As a dominant supplier of chipset designs for low-power applications, Arm is considered a key strategic asset for a number of markets, including mobile phones and Internet of Things (IoT).
This Arm deal follows Nvidia’s $7 billion purchase of Mellanox, which closed in March of this year. Mellanox is an Israel-based company that is a leader in smart network interface cards (NICs) as well high-performance networking gear. Also this year, Nvidia made the smaller acquisition of Cumulus Networks, which is an open networking pioneer that supplies a network operating system (NOS) popular in cloud applications such as top-of-rack switches, including switches produced by Mellanox.
Adding cloud processing power, breaking up bottlenecks
If one tracks the newly acquired assets, it follows a pattern of Nvidia using chips and processing power to add value in the cloud. The shift happening right now is a move to upgrade the network and connect it more quickly to edge applications such as mobile devices. Nvidia has just acquired key assets to do that.
Mellanox’ SmartNICs meld well with Nvidia’s GPU strategy because GPUs serve to boost compute processing of cloud applications. Mellanox boosts the network processing in the NIC by offloading key processing functions such as encryption. Networking has become key to cloud performance because the networking links can often become bottlenecks to cloud applications performance.
This new basket of technology that Nvidia has acquired targets new trends in the cloud extending from the NICs to the mobile edge. These are markets coveted by leading networking and infrastructure incumbents such as Broadcom, Cisco, Nokia, and Intel, but Nvidia now has all of the key building blocks. This has the potential to upset the major dynamics of networking that are already being fundamentally changed by the trend toward disaggregation, or separation, of components for networking operating systems from chips.
What’s Huang doing next?
CEO Jensen Huang has been the mastermind of Nvidia’s impressive moves to capture new markets. In the 1990s, Nvidia was a little-known graphics chip specialist whose accelerators were popular with gamers. Few people saw that it would ascend to be one of the dominant technology players in cloud, which would eventually yield a skyrocketing stock price and a market capitalization of $300 billion, which has surpassed Cisco ($168B), IBM ($109B), and Intel ($212B).
Nvidia’s move into the cloud and data center came via its graphics chip architecture—the graphics processor unit (GPU)—that was well-suited to cloud applications such as artificial intelligence (AI), and used it to gain share in the cloud by accelerating processing. Although Nvidia did not “invent” the GPU, as it frequently claims in marketing, it did become the leader in the market for selling GPUs into the cloud.
SmartNICs show a similar potential for acceleration and integration. Earlier in the year, just prior to the Nvidia acquisition closing, Mellanox announced a new switch ASIC optimized for cloud, delivering 32 ports of 400 Gbit/s Ethernet and total switch capacity of 12.8 terabits. Mellanox has also been a leader in cloud networking offload technologies such as RoCE (RDMA over Converged Ethernet), which help accelerate cloud-networking capabilities.
Meanwhile, Arm is a goliath in the mobile space. It licenses its designs to nearly all the major mobile device and suppliers, including Nvidia, which licensed Arm prior to the acquisition. Customers include Samsung, Qualcomm Snapdragon and Apple. The attraction of the Arm architecture is that it consumes less power than competing chipsets from competitors such as Intel.
It’s clear that the Arm deal in particular will raise government anti-trust scrutiny of Nvidia, even though Nvidia says it has no intention of changing the business model and it will continue to license Arm IP.
But some competitors, such as Broadcom, may not wait. It looks like Broadcom may phase out support of the Cumulus Networking SDK Broadcom chips, according to the sources cited by Ferro (Futuriom inquired with Broadcom about the status of the Cumulus SDK, but has not yet heard back).
Right now —with Arm, Cumulus, and Mellanox —Nvidia has a large basket of valuable new assets that could change cloud and mobile networking. Competitors are correct in raising their eyebrows, and based on Nvidia’s track record, I would be scared.
R. Scott Raynovich is the founder and chief analyst of Futuriom. For two decades, he has been covering a wide range of technology as an editor, analyst, and publisher. Most recently, he was VP of research at SDxCentral.com, which acquired his previous technology website, Rayno Report, in 2015. Prior to that, he was the editor in chief of Light Reading, where he worked for nine years. Raynovich has also served as investment editor at Red Herring, where he started the New York bureau and helped build the original Redherring.com website. He has won several industry awards, including an Editor & Publisher award for Best Business Blog, and his analysis has been featured by prominent media outlets including NPR, CNBC, The Wall Street Journal, and the San Jose Mercury News. He can be reached at [email protected]; follow him @rayno.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceTelecom staff. They do not represent the opinions of FierceTelecom.