Nvidia’s (NVDA) New Cloud Market Push Puts Partners on Edge

Chipmaker Nvidia (NVDA) recently launched DGX Cloud Lepton, which is a new cloud service that lets AI developers rent GPU servers directly from Nvidia, according to The Information. The move pushes Nvidia deeper into the cloud market and puts it in competition with companies like CoreWeave (CRWV) and Nebius (NBIS), which are also participating in the service. Indeed, Nvidia invited cloud partners to contribute servers to its “marketplace,” but some firms worry that this gives Nvidia a stronger relationship with AI customers and reduces the need to use independent cloud providers.

For instance, Parasail, a GPU cloud company, declined Nvidia’s offer to join Lepton because it didn’t want to lose control of its customers. Nevertheless, over a dozen companies have joined in order to avoid losing market share to competitors. This is because many GPU providers see the financial benefits: GPUs are expensive, and renting them through Nvidia’s marketplace can help maximize returns.

In addition, CEO Jensen Huang said that this service is part of a plan to build a “planetary-scale AI factory” and expects the firm’s cloud and software business to reach $2 billion in annual revenue. Still, it is worth noting that Nvidia’s cloud expansion has caused some tension with big cloud providers. In fact, AWS (AMZN) initially rejected Nvidia’s earlier DGX Cloud service but later joined. Now, the new Lepton marketplace is targeting smaller AI startups. When asked why Nvidia is competing with partners, a company executive stated that the goal is simply to make GPUs easier to access worldwide.

What Is a Good Price for NVDA?

Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 35 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $172.36 per share implies 20% upside potential.

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