Starting tomorrow, Nvidia will host its GTC developer conference, which has become the focal point of the industry. Many are questioning how Nvidia’s software contributes to its competitive advantage alongside its hardware. In response to these inquiries, we will outline our thoughts here.
While the potential unveiling of the next-gen B100 GPU may be a highlight, GTC is primarily a developer-focused event. It serves as Nvidia’s flagship platform for cultivating the software ecosystem around CUDA and its other software components.
It’s essential to recognize that when discussing Nvidia, many, including ourselves, often use “CUDA” as a catch-all term for all of Nvidia’s software offerings. However, Nvidia’s software moat extends beyond just the CUDA development layer, which will be crucial for the company’s defense.
Guest author Jonathan Goldberg, founder of D2D Advisory, a consulting firm, has developed growth strategies and alliances for companies in various industries.
Last year’s GTC saw Nvidia release 37 press releases showcasing numerous partners, software libraries, and models. We anticipate a similar trend next week as Nvidia strengthens its defenses.
The significance of these partnerships lies in the hundreds of companies and millions of developers creating tools based on Nvidia’s offerings. Once developed, these individuals are unlikely to switch to other chips anytime soon. Nvidia’s partners span diverse industries, indicating significant momentum in Nvidia’s favor.
In essence, Nvidia’s current defensibility hinges on the inertia of software ecosystems. Companies invest heavily in software development, making it challenging to switch to alternative platforms once their investments are made.
While alternatives to CUDA are emerging, such as AMD’s ROCm, achieving significant adoption will take time. Nvidia’s software ecosystem remains highly defensible, even in the face of emerging competitors.
The primary threat to Nvidia’s software moat comes from its largest customers, particularly hyperscalers who have the resources to build alternatives. Despite this, Nvidia’s software barriers to entry are likely to remain intact if the company can establish itself firmly in the market.
Nvidia’s software ambitions have evolved over the years, with a shift towards providing software as a service to chip customers rather than focusing on standalone software revenue. This strategic shift may mitigate the risk of direct competition with its major customers.
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