Core Viewpoint - The traditional computing architecture is insufficient for the efficient, low-energy, and large-scale collaborative AI training needs, leading to the trend of supernodes which significantly boosts the demand for Scale up-related hardware [1][3] Group 1: AI Hardware Capabilities - AI hardware capabilities are driven by three main factors: computing power (determined by GPU performance and quantity), storage capacity (high-bandwidth memory cache close to GPUs), and communication capacity (encompassing Scale up, Scale out, and Scale across scenarios) [1][2] Group 2: Market Trends and Projections - The market for Scale up switching chips is expected to reach nearly $18 billion by 2030, with a CAGR of approximately 28% from 2022 to 2030, driven by the demand for supernodes [3] - The construction of large-scale AI clusters necessitates extensive interconnectivity between nodes, leading to increased demand for Scale out hardware, while power resource limitations in single regions will promote the adoption of Scale across solutions [3] Group 3: Communication Protocols - Different communication protocols are required for Scale up and Scale out, with major companies developing proprietary protocols alongside third-party and smaller firms promoting public protocols [4] - Notable proprietary protocols for Scale up include NVIDIA's NVlink and AMD's Infinity Fabric, while public protocols include Broadcom's SUE and PCIe [4] Group 4: Domestic Hardware Development - The domestic production rate of communication hardware is currently very low, presenting a significant opportunity for domestic replacement in the market [5] - Companies like Shudao Technology and Shengke Communication are advancing towards commercialization of their products, indicating a growing domestic market potential [5] Group 5: Investment Opportunities - Beneficiaries of PCIe hardware include Wantong Development and Lanke Technology, while Ethernet hardware beneficiaries include Shengke Communication and ZTE [6]

Core Insights - The focus of attention after NVIDIA's Q2 earnings report is on whether the company's revenue can justify its rapid market capitalization growth, with the network business emerging as a significant growth driver [1] - The network segment, marked as "network," contributed more than 16.1% to NVIDIA's overall revenue, with a 46% quarter-over-quarter increase and nearly doubling year-over-year, reaching $7.25 billion in Q2 alone [1] - The acquisition of Mellanox is highlighted as a pivotal move, with the network business now generating an annual operating revenue of $25 billion to $30 billion, a remarkable figure for a segment previously seen as a secondary player [1][2] Revenue Contribution - The network business's revenue surged to $7.25 billion in Q2, significantly exceeding the acquisition cost of Mellanox, which was $6.9 billion [1][2] - This growth indicates that the network segment is becoming a critical component of NVIDIA's overall financial performance, contributing substantially to its valuation [1] Technological Advancements - NVIDIA's Spectrum-XGS platform addresses challenges such as latency and enables multiple data centers to operate as a unified system, enhancing the company's capabilities in the network domain [3][4] - The technology breakthrough from the acquisition of Mellanox allows geographically distant data centers to function as a single entity, facilitating the creation of large-scale AI factories [3] Strategic Importance of Mellanox - The acquisition of Mellanox is described as one of the most significant mergers in the industry, with its InfiniBand technology being crucial for high-performance computing and AI applications [6][15] - Mellanox's technology is essential for achieving the data processing speeds required for AI, as emphasized by Eyal Waldman, the founder of Mellanox [6][17] Future Infrastructure Developments - NVIDIA plans to deploy 576 GPUs in a single rack, necessitating significant infrastructure expansion to support this scale [11] - The company is focusing on integrating optical connections into switches to reduce power consumption and increase GPU capacity within data centers [13][14] Market Position and Growth - NVIDIA's strategic investments and acquisitions, particularly in Israel, have positioned it as a leader in the semiconductor industry, with a workforce of over 5,000 employees in its Israeli R&D centers [17] - The company's market capitalization has soared from $93 billion to $4 trillion, largely attributed to its successful bets on AI and the integration of Mellanox's technologies [16][17]