Walmart will use Nvidia and AI to gain ground on Amazon

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People line up at a Walmart store that reopened Friday after Tropical Storm Harvey in Port Arthur, Texas, U.S., September 1, 2017. REUTERS/Carlo Allegri Thomson Reuters

There was a time, not too long ago, when Wal-Mart was the undisputed king of retail. However, e-commerce has changed the landscape, and over the last few years, Amazon.com, Inc. has been taking an increasingly large slice of the retail pie. Wal-Mart has been playing catch-up in online sales, but now it seems the retail giant is ready to take the fight to Amazon, with a little help from NVIDIA Corporation and artificial intelligence (AI).

In a note to clients, Global Equities Research analyst Trip Chowdhry revealed that Wal-Mart would be building huge data centers to house its cloud computing and make a sizable push into deep learning, a segment of artificial intelligence. Wal-Mart will build a “GPU farm” using graphics processing units (GPUs) from NVIDIA to power its cloud platform, which would be about 1/10th of the size of Amazon’s massive cloud operations.

Never underestimate the competition

Amazon has made enormous investments in the AI discipline of deep learning, which uses a computer simulation of the human brain to recreate our capacity to learn. These sophisticated algorithms can recognize patterns and distinguish differences when fed reams of seemingly unrelated data. This has led to advances in image processing, voice recognition, and natural language processing.

Amazon has used these developments to create Alexa, the virtual assistant behind its Echo family of smart speakers, as well as integrate these capabilities into its Amazon Web Services (AWS) cloud computing. It also allows the company to process its vast stores of consumer data to provide online shoppers with useful recommendations. Amazon’s technology has put Wal-Mart at a decided disadvantage.

Sleeping with the enemy

Wal-Mart is a longtime user of AWS, but as tensions between the two have risen the company has been looking to break those ties and bring its data in-house, rather than enrich the coffers of its staunchest competitor. Wal-Mart’s drive into deep learning would provide the retailer with a much needed technological boost as it moves to increase its digital presence and take the fight to Amazon’s home turf. Wal-Mart has already made a number of high-profile acquisitions in the online space, adding Jet.com, Modcloth, and Bonobos to its stable.

Chowdhry notes that in the next 6 months, “Walmart is going full steam with [Deep Neural Networks] and will be creating its own NVIDIA GPU Clusters on Walmart Cloud.” NVIDIA’s GPUs form the foundation of many of the advances in AI in recent years. Scientists found that the same processing power that allows GPUs to render images in video games is also ideal for the number-crunching required for deep learning. Hosting its own cloud replete with deep learning will allow Wal-Mart to benefit from its customer data without having to share that data with the very competitor it is trying to overcome.

NVIDIA also stands to benefit from the move. Its stock has gained 165% in the last year, and much of that comes from the use of GPUs in deep learning applications. In its most recent quarter, data center revenue from AI soared 175% over the prior year quarter.

Tidal wave of e-commerce at stake

E-commerce has been claiming an increasing percentage of shopping dollars. During the second quarter 2017, online sales in the US grew to $111.5 billion, yet accounted for 8.9% of US retail sales. Wal-Mart doesn’t want to cede these sales to Amazon, and recent moves show that the retailer is positioning itself to better compete in the digital realm.

A move into deep learning will allow Wal-Mart to leverage the customer data from its various enterprises and put the company in a better position to compete with its formidable foe. While Wal-Mart may be playing catch-up online, Chowdhry advises that “investors should not underestimate the Technology acumen of Walmart Software Developers.” With a history of disrupting the retail industry and creating innovations in inventory and logistics, that sounds like sage advice!

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Read the original article on The Motley Fool. Copyright 2017. Follow The Motley Fool on Twitter.

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