Why Nvidia's Quiet Business Unit Is Gaining Steam

Added: 2026-05-27

[00:00:00]The other thing that came up on the call last night is CFO Colette Kress Kress she talked about rental prices for older Nvidia chips and she mentioned that they had actually come up. What do you think is driving the increase in those rental prices? Is it just the GPU crunch broadly? Is it customers saying that hey maybe we don't need the latest and greatest we can meet make do with the hopper family or the A100s? What do you think I think all the excuse me I think all the way what you're saying is that Sorry. Is that you're still seeing demand is just still out stripping whatever supplies out there. So compute demand is still exceeding most people's expectations. So I do think that is why you know the rental costs are still going up. You know we've seen that already for the neo clouds have been talking about that in the last couple of months as well. So it still paints an overall picture that there's just not enough compute demand out there. But I do think one other thing that's interesting is you know the supply side bottlenecks continue to diffuse out to more and more places. So one thing I think that another narrative that Nvidia has talked about is all these recent deals on the optical side.

[00:01:14]If you look at these deals with Coherent and Lumentum and Corning these are all meant to secure the supply side on on the optical side which we think will be a very big driver and so I think Nvidia agrees with that which is why they want to make sure that they have enough supply there.

[00:01:28]Can you explain that a little bit more for people who don't follow optical as much just unpack that a little bit more in in layman's terms?

[00:01:35]Sure. So as you see these data centers build out one of the bottlenecks is really you know the bandwidth the speed has to get faster and faster and one of the things that's driving that is is the optical demand. This is going to be we're going to move from copper to optical and this is going to create a significant amount of demand to help improve performance.

[00:01:55]So it's not purely just based on the actual computing power of the chip. It's a much more full a system integrated, and that includes the networking piece.

[00:02:04]All right, and so Nvidia has been moving there already with its Mellanox, but in addition to that, they got to make sure the rest of the supply chain is there with them. For example, if you look at memory, this has been a big bottleneck, and they have done a lot of things to make sure they have secured enough memory capacity given the tightness we're seeing. They're just extending that to another part of the supply chain. Got it. So, when when you say optical, you're you're talking about the the the networking products that that Nvidia has moved deeper into. Yeah, like they're basically the transceivers that goes into the backbone in terms of in terms of providing the the networking bandwidth both for scale out and scale up. You're going to need a lot of networking for that. Right. Um a couple other questions for you. So, Vera Rubin, the the new family of chips, when you talk to channel partners or people in the orbit of customers, what are they hoping for out of this new family of chips, and you know, how confident are you that Nvidia can deliver that?

[00:03:04]Well, there's always potentially a concern that whenever you have a new ramp, there could be some, you know, potential issues in supply chain. There has been some potential concerns about memory not catching up or at least not quick enough. But, we think this going to be relatively short-term. At the end day, I think Nvidia is still pushing you know, performance-based. Rubin does increase performance, but that also brings up another question is that we're seeing some competition from the ASIC side, especially Google's TPU.

[00:03:32]We've seen a lot of very strong momentum there.

[00:03:35]Which is why I think the market is looking for them to extend their customer base because, you know, I think if you look at Neo Clouds, right?

[00:03:43]They're not going to be moving into the ASIC side. So, they're going to be very much within the GPU camp. So, I think a lot of that Rubin demand will also go into these non-hyperscale customers as well.