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NVIDIA Buys SwiftStack, Adds Full-Stack Software to Portfolio

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NVIDIA (NVDA - Free Report) recently acquired data storage software firm, SwiftStack, as part of its strategy to enhance AI and ultra-speed computing support for its customers. SwiftStack software helps enterprises accelerate their data analytics, AI and high-performance computing.

Financial terms of the acquisition were not disclosed. However, SwiftStack was reported to have raised around $23.6 million in funding arranged by Mayfield Fund and OpenView Venture Partners, giving us an idea about the company’s valuation.

This buyout comes at a time when NVIDIA’s $6.9 billion acquisition of Mellanox Technologies (MLNX - Free Report) awaits approval from China, which is due Mar 10 but might possibly be expended to Jun 10.

NVIDIA’s balance sheet seems to back its acquisition strategies. As of Jan 26, 2020, the company’s cash, cash equivalents and marketable securities were $10.90 billion, whereas total debt was $1.99 billion, which positions it fairly to carry out its buyouts.

What SwiftStack Has to Offer

SwiftStack’s strong expertise in building AI supercomputers and a portfolio of products and solutions supporting AI, high-performance computing and accelerated computing workloads makes it an attractive buy for NVIDIA. This is because NVIDIA has been intending to provide its customers with more than only GPUs or software libraries for quite some time.

The acquired company was one of the largest contributors to OpenStack's Swift object storage platform. Moreover, PayPal (PYPL - Free Report) , Verizon (VZ - Free Report) , Rogers and Snapfish are among SwiftStack’s customers.

NVIDIA was also a customer to SwiftStack for more than a year and the latter helped the former solve data challenges to enable AI at scale. The acquisition is expected to boost NVIDIA’s data center business.

Reportedly, the SwiftStack team will continue to maintain its set of open source tools, such as Swift, ProxyFS, 1space and Controller.

Rationale Behind Focus on Datacenter Business

NVIDIA is focusing on new growth boosters for its data center business, such as inference, data science and machine learning techniques, to consolidate its presence in this niche market.

For fiscal 2020 data center revenues reached a record high of $2.98 billion, up 2% year over year, driven by hyper-scale demand, which was in turn fueled by purchases of NVIDIA’s training and inference products supporting key AI workloads, such as natural language understanding and conversational AI.

Notably, the data centers business presents a solid growth opportunity for NVIDIA. As more and more businesses are shifting toward the cloud, the need for data centers is increasing. To cater to this huge demand, data center operators like Amazon, Microsoft and Alphabet are expanding their operations globally, which is driving demand for the GPUs. This bodes well for NVIDIA.

Notably, NVIDIA anticipates data center TAM to more than double to $50 billion by 2023.  

NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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