Data centers have become a growth market for NVIDIA Corporation (NASDAQ:NVDA) since its graphics processing unit technology, which is used in video gaming equipment, is now also being utilized by providers of cloud computing services in order to process vast amounts of data created by users including videos. In its most recent quarterly report the data center segment of Nvidia grew at a rate of 175% year-over-year.
One of the biggest markets for Nvidia is China and the world’s most populous country continues to offer huge promise for growth. The data center market of the world’s second biggest economy is expected to expand at a rate of 13% up to 2020 per a report compiled by Technavio.
China’s main growth driver is of course the large population which forms a big market. Currently a quarter of the global population that is online is Chinese. The opportunities for growth are immense since only half of the Chinese are online currently. This is because the government of China has set an ambitious goal of providing internet access to each one of its citizens in the course of the coming half a decade.
So far data center providers have underserved the market in China with demand exceeding supply. With an additional 600 million new internet users expected to come onboard, the demand for data centers will only increase as there will be more data generated by these new users. A new law was also introduced in China which requires foreign firms to store the data of their Chinese users within China and this is expected to create even more demand for data centers.
One of the chipmakers that is likely to present competition to Nvidia in China is Advanced Micro Devices, Inc. (NASDAQ:AMD). The chipmaker recently announced a partnership with Chinese online search giant Baidu Inc (ADR) (NASDAQ:BIDU). While that might seem like a big threat, it should be noted that Nvidia still remains the preferred chip provider for Baidu. Just before AMD inked a deal with Baidu, Nvidia had signed an agreement which was much broader to have its new Volta GPUs deployed on the online search giant’s cloud division.
On Friday shares of Nvidia Corporation fell by 0.46% to close the day at $196.90.