Cloudflare shares were up 11% yesterday after the company announced that it’s teaming up with graphics processing unit maker Nvidia.
Cloudflare shares are on the rise after announcing that it will be working with Nvidia (NASDAQ: NVDA) to bring artificial intelligence (AI) to its global edge network. The new partnership will add Nvidia’s AI products to Cloudflare’s (NYSE: NET) existing suite of services that protect and accelerate internet applications for businesses, including Cloudflare Workers.
Cloudflare CEO, Mathew Prince, spoke about the deal, stating:
“Cloudflare Workers is one of the fastest and most widely adopted edge computing products with security built into its DNA. Now, working with NVIDIA, we will be bringing developers powerful artificial intelligence tools to build the applications that will power the future.”
The rise of AI
Modern applications use AI for a number of tasks, ranging from translating text to object recognition in digital images, making machine learning models a vital component of application development. Users need these functions to be fast and dependable, while developers need to keep proprietary machine learning reliable and safe. Therefore, the partnership makes perfect sense as Cloudflare helps customers with their security, performance, and reliability while Nvidia gives developers AI-supported application frameworks. The two together will bring a unified, stronger product to market.
Nvidia’s growing dominance in the chip market
Cloudflare’s announcement comes just one day after Nvidia said that it will begin creating its own central processing units (CPUs) for AI data servers. As the tech world is currently in the midst of a global chip crisis, chipmakers are benefiting from this heightened demand, and Nvidia is relying on this trend as it tries to compete with its chip maker rival, Intel (NASDAQ: INTC).
Nvidia bought Arm Ltd., a UK-based semiconductor company, for $40 billion in 2020 and is now producing its first data center CPU chips. This move directly challenges Intel, which holds more than 90% market share in the highly profitable chip market. This is a massive move for Nvidia as the company now has a new income stream in the chip market, which is expected to reach annual global revenues of $251 billion by 2026. With Nvidia’s partnership with Cloudflare and its move into building CPUs, the Santa Clara-based company has the opportunity to rapidly grow its $380 billion business.
Cloudflare shareholders hope that by collaborating with Nvidia, the former will benefit from the company’s continued rise in the AI market. This is a highly advantageous sector to get into as more companies look to artificial intelligence to help their business grow and the partnership should put the two companies at the forefront as market leaders.
Like many other technology stocks, Cloudflare’s share price has been on a wild ride recently. However, yesterday’s boost after the Nvidia announcement helped the stock regain some of its losses, and shares are up over 26% in the last six months.
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