What Can the Telecommunications Industry Learn from NVIDIA’s Investment Strategy

By Shadine Taufik | 4Q 2024 | IN-7648

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Dutch firm Nebius, a cloud computing platform for Artificial Intelligence (AI), announced that it had raised US$700 million in funding on December 2. The firm was once the holding company of Russian search engine giant Yandex, although it has since divested assets in the country and split, following the imposing of global sanctions to Russia-affiliated enterprises. The standalone unit resumed trading on Nasdaq under its new name in October after a 3-year break-its former iteration had previously been public since May 2011.

Nebius operates shared data centers, as well as its own purpose-built greenfield sites to offer Graphics Processing Unit (GPU)-as-a-Service (GPU-aaS). It also recently debuted its cloud platform built on the NVIDIA accelerated computing platform, which encompasses the Machine Learning (ML) lifecycle, including data processing, training, fine-tuning, and inference. Compute resources are on-demand and scalable, with managed services to simplify AI model development. Among its other listed offerings are virtual private cloud, object storage, and container registry services to help clients with network and data management.

Although it may seem like a straightforward move, this investment, in fact, holds a more calculated, strategic purpose that firms looking to enter new spaces can learn from.

Clearly, NVIDIA's probe into cloud computing highlights the value proposition of cloud adoption as an enabler for AI. Its Graphics Processing Units (GPUs) are currently seeing the most utility in powering enterprise AI models and it has invested in numerous AI firms such as Inflection AI, Wayve, Scale AI, Figure, Mistral AI, Hugging Face, and Cohere.

However, Nebius isn't the only cloud computing firm that NVIDIA has invested in. It also backed Nebius' competitor, U.S.-based CoreWeave, an AI-focused hyperscaler that has racked up a US$23 billion valuation. Although NVIDIA also partners with the top hyperscalers Amazon Web Services (AWS), Google Cloud Platform, and Microsoft-all of which utilize the company's GPUs.

These points are interesting to note as they convey the crux of why NVIDIA has been able to seamlessly enter new verticals and markets-an approach that can be replicated by firms of any type.

Partnering with incumbents, while investing in growing companies in the targeted space provides a greater synergy, and stake in the success of the burgeoning market. This also allows NVIDIA to possess greater geographic reach, and vertical-agnostic influence, given the large-scale, global need for cloud infrastructure. The company has chosen to focus on core competencies, but collaborate to scale. This extends to its partnerships with hyperscalers to offer GPUaaS, instead of offering in-house cloud capabilities. Outsourcing these capabilities has allowed the firm to go deeper into niches and geographies without expending unnecessary infrastructure, human capital, and other resources that would be better suited to innovating flagship products.

On a related note, NVIDIA's actions have enabled it to create market dependencies through strategic investments. Instead of pursuing direct competition with other cloud providers, NVIDIA has made strategic investments to influence the market. Acquiring stakes in Nebius and CoreWeave, especially since they utilize their own data centers, is not only complementary to NVIDIA's business, but also encourages these emerging, specialized incumbents to utilize NVIDIA hardware. In expanding to cloud computing, the firm's investments allow it to align with the emerging tech market, reduce infrastructure costs, share Research and Development (R&D) innovation, and mutually cultivate insights into evolving customer needs. This is especially important when considering the stark possibility of hyperscalers investing in proprietary chips to rival NVIDIA. As opposed to full, costly, and often unnecessary Mergers and Acquisitions (M&A), buying stakes in innovative, growing firms enables the cultivation of influence, building out an ecosystem that supports an enterprise's products.

Lastly, NVIDIA makes accessibility a priority, investing in solution simplification. Offering or partnering with firms to create solutions that reduce the complexity of an enterprise's solution-especially in a deep-tech setting-has helped the company acquire more small and medium-sized customers. This comes in the form of cloud-based as-a-Service offerings, which require less Capital Expenditure (CAPEX) and physical infrastructure to adopt, and provides an easy-to-use application or platform. This allows customers to instantly implement and directly interact with new technologies without barriers. Infrastructure is essential, but delivery is, too-the medium through which solutions are accessed must be taken into greater account.

Before firms look to enter new domains, it is worth understanding, and if suitable, replicating strategies like that of NVIDIA's to aid in a smoother transition. One such area that could benefit from this is the telecommunications industry, in its attempt to move into the enterprise, Business-to-Business (B2B) domain after amassing a long legacy in the commercial, Business-to-Consumer (B2C) niche.

As telcos-with a shift to enterprise segments-are looking to enter a variety of new verticals at once, industry leaders require structured, informed approaches to ensure that client needs are being met, while limiting expenditure on their part. Here is what NVIDIA can teach these firms:

• Telecommunications companies are not required to build out infrastructure to bridge the gap between enterprises and themselves. Collaborating with solutions incumbents in the markets they are looking to target would be a more fruitful way of gaining clients, given the knowledge of partner staff in the business domain, as well as their preexisting network of customers. Infrastructure expenditure should instead be anchored to forming co-innovation partnerships and fueling the bridging between incumbents in the field and the telco itself.
• In the telecommunications space, vendors are encouraged to build synergistic relationships with adjacent infrastructure providers through investments to offer the connectivity component of full-stack, end-to-end solutions. While the big fish are leveraged for partnerships and collaborations, emerging players, which are rife for innovation and continually expanding, should be invested in. For telcos, this could mean investing in deep-tech startups offering next-generation technology in the targeted vertical.
• If telecommunications providers are to successfully target enterprises with their connectivity offerings, it is integral to create a software interface that clients are likely to be familiar with (such as that of Wi-Fi management), as well as offer automation, or managed services. As NVIDIA has done with its partnerships and investments in sponsoring solutions that enable accessibility for its GPUs, telcos must do the same. To access their products, firms should lower technical and financial barriers through offering simplified versions of their products, such as through as-a-Service models.