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Get Your "MPA" in Deep Learning

Kevin Cook

Big happenings in AI land recently as new supercomputers get built and Einstein meets Watson. Both events were announced on March 6, 2017 and old Big Blue, IBM, finds itself at the center of all of this, still as relevant as the day Deep Blue beat Garry Kasparov in 1996.

The supercomputer comes from Fujitsu who is using 24 NVIDIA (NVDA) DGX-1 AI systems to help build a supercomputer for RIKEN, Japan’s largest comprehensive research institution, for deep learning research. Scheduled to go online in April 2017, the RIKEN Center for Advanced Intelligence Project will use the new system as a platform to accelerate R&D into AI technology.

The largest customer installation of DGX-1 systems to date, the supercomputer will accelerate the application of AI to solve complex challenges in healthcare, manufacturing and public safety.

“DGX-1 is like a time-machine for AI researchers,” said Jen-Hsun Huang, founder and CEO of NVIDIA. “Enterprises, research centers and universities worldwide are adopting DGX-1 to ride the wave of deep learning — the technology breakthrough at the center of the AI revolution.”

According to the NVIDIA blog post on this news…

“Conventional HPC (High-Performance Computing) architectures are proving too costly and inefficient for meeting the needs of AI researchers. So companies like Fujitsu and customers like RIKEN are looking for GPU-based solutions that reduce cost and power consumption while increasing performance. Each DGX-1 combines the power of eight NVIDIA Tesla P100 GPUs with an integrated software stack optimized for deep learning frameworks, delivering the performance of 250 conventional x86 servers.”

In the video that accompanies this article, I share some simple graphics from NVIDIA that explain how GPU (graphics processing unit) semiconductors work.

In the video, I also explain the IBM-NVDA connection as the two have been working together for several years on building HPC architectures and in November announced collaboration on a new deep learning tool “to help train computers to think and learn in more human-like ways at a faster pace.”

Einstein Taps Watson’s Brain

The second story revolving around IBM, involved Salesforce (CRM) , who was the talk of the town this week.

First, Jim Cramer was talking early in the day on March 6 during CRM’s presentation at the Raymond James Institutional Investors Conference and he had a directive for Alphabet ( GOOGL) : Better buy CRM since nothing else is comparably affordable in embedded enterprise SaaS!

Here was the story from StreetInsider.com, with a recap of their own similar call 5 weeks ago ...

Salesforce.com shares are now trading in positive territory following a mention by Jim Cramer earlier saying that Alphabet needs to by Salesforce.com. This follows a Street Insider post back in January where we wrote "It would appear reasonably obvious that Alphabet would over pay for Facebook (FB), struggle to buyout Amazon (AMZN), leaving the rumor-popular Salesforce as the next candidate. Alphabet did not buyback any stock in 2016, likely shoring up capital for a Salesforce purchase. Given that Microsoft, a leading rumored contender for Salesforce, bought LinkedIn, it appears that Alphabet is on the prowl for Salesforce."

Now today, on CNBC during a segment on Unusual Option Activity, at the 1:40 mark Jim Cramer goes on about what Google needs (emphasis ours): "I think Alphabet, Google, needs very much to get away from a model that is advertising based. People feel they are trapped in it. That's why they're doing Waymo, autonomous cars, which is going very very well. It's why they're doing data-center work, the $400 million that SNAP (SNAP) is paying them. But if you want to own the enterprise, OK you want to own it, you just BUY SALESFORCE. You take $80 billion and you buy it. Does Marc Benioff want to sell with the beautiful new tower coming and loving the independence of it? They have a close relationship. I think it's up to Benioff if he wants to sell but I do think that Alphabet NEEDS BENIOFF! NEEDS SALESFORCE to get a higher price to earnings multiple."

Then, after the close, Ginni and Marc got together (from the press release)...

IBM and Salesforce today announced a global strategic partnership to deliver joint solutions designed to leverage artificial intelligence and enable companies to make smarter decisions, faster than ever before. With the partnership, IBM Watson, the leading AI platform for business, and Salesforce Einstein, AI that powers the world's #1 CRM, will seamlessly connect to enable an entirely new level of intelligent customer engagement across sales, service, marketing, commerce and more. IBM is also strategically investing in its Global Business Services capabilities for Salesforce with a new practice to help clients rapidly deploy the combined IBM Watson and Salesforce Einstein capabilities.

The partnership will bring new insights from Watson directly into the Salesforce Intelligent Customer Success Platform, combining deep customer insights from Salesforce Einstein with Watson's structured and unstructured data across many sources and industries including weather, healthcare, financial services and retail. Together, Watson and Einstein will ingest, reason over and derive recommendations to accelerate decision making and drive greater customer success.

Comments on the News: "Within a few years, every major decision—personal or business—will be made with the help of AI and cognitive technologies," said Ginni Rometty, chairman, president and chief executive officer, IBM. "This year we expect Watson will touch one billion people—through everything from oncology and retail to tax preparation and cars. Now, with today's announcement, the power of Watson will serve the millions of Salesforce and Einstein customers and developers to provide an unprecedented understanding of customers."

"The combination of Einstein and Watson will make businesses smarter and our customers more successful," said Marc Benioff, chairman and CEO, Salesforce. "I'm thrilled to form an alliance with IBM—no company's core values are as close to Salesforce's as IBM's. It's the best of both worlds."

This is a huge move by both companies!

In the after-hours session on March 6, CRM shares hit a new 52-week high above $85. We have yet to see bullish investors able push it back there since, even as Wall Street investment banks raise their price targets, with Morgan Stanley now at $107, Wedbush at $102, and Cowen and Stifel at $100.

But the story is clear: GOOGL is now farther away from doing anything with CRM.

And IBM is certainly closer, though that is probably a distant reality this year.

In any case, the investment case for CRM was sound last week and just got a lot sweeter this week.

And the case for owing NVDA shares below in the $90’s is ever sound.

To learn more about the “massively parallel architecture” that runs NVIDIA processors and IBM supercomputers, check out my video attached to this article. Or my other article today AI Deep Dive: NVDA, IBM, CRM .

Disclosure: I own shares of CRM and NVDA for the Zacks TAZR Trader service.

Kevin Cook is a Senior Stock Strategist with Zacks Investment Research where he runs the Zacks TAZR Trader service.

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