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Investors Business Daily

These Key Tech Players Are Taking On Nvidia Over Network Standards

Nine technology companies are backing a new computer networking standard for internet data centers, posing a threat to hot chipmaker Nvidia and NVDA stock.

Arista Networks, Cisco Systems and Hewlett Packard Enterprise are among companies that on Wednesday announced the formation of the Ultra Ethernet Consortium. The next generation Ethernet devices will be an alternative to the "InfiniBand" technology adopted by Nvidia.

Also, other founding members of the consortium include chipmakers Advanced Micro Devices, Broadcom, and Intel. Meanwhile, there's also Meta Platforms, Microsoft and privately held Eviden.

"UEC was launched to leverage existing Ethernet technologies to develop an architecture for high-performance AI and HPC (high performance computer) networking," UBS analyst David Vogt said in a note to clients.

NVDA Stock: Consortium Backs Alternative To Nvidia

Nvidia closed its $6.9 billion acquisition of InfiniBand chipmaker Mellanox in April 2020. Currently, Nvidia is the biggest seller of InfiniBand chips.

In addition, Nvidia does make Ethernet network switches but is not a member of the new Ultra Ethernet Consortium.

Meanwhile, the consortium expects standards-based products to be available in 2024.

"We do not expect networking companies to recognize material revenue until mid-2024," said UBS's Vogt.

NVDA stock has more than tripled thus far this year through Thursday's close, boosted by increased demand for chips that process artificial intelligence software in data centers.

Nvidia Leads In AI Chips

Meanwhile, all AI software needs computing power to find patterns and make inferences from large quantities of data. Nvidia is the leading maker of AI chips used in data centers.

According to a Goldman Sachs report quoting market research firm 650 Group, Nvidia's dominance in AI chips has created synergy with Infiniband sales. But this new consortium aims to target AI networks that connect data centers to broader wide area networks.

On the stock market today, NVDA stock fell 3.3% to close at 455.20. CSCO stock edged down a fraction to 52.37. ANET stock dipped 2.8% to 171.41.

Also, Arista and Cisco sell computer networking switches. NVDA stock has soared 218% this year. Arista stock has gained 43%. Cisco stock has climbed 10%.

Further, NVDA stock sits on IBD Leaderboard. In addition, IBD's curated list of leading stocks that stand out on technical and fundamental metrics.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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