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NVIDIA Corporation (NSDQ:NVDA) stock has been soaring like a rocket for the better part of 2016. NVDA stock was up over 185% for the year, a few trading sessions ago. However, the meteoric rise was brought to a grinding halt as NVDA stock fell by nearly 6% in the just 3 trading sessions, bringing the stock back under the $90 level. While the year-to-date gains of 168% (as of the last close price on December 2) are definitely not meager, should investors be worried about the recent fall? Why did NVDA stock drop like a rock? Should investors book profits or use the recent dip to accumulate more share of Nvidia?

Why Did Nvidia Corporation Stock Fall?

Investors should firstly understand the reason for the recent fall in NVDA stock price. The fall was triggered by recent comments by Amazon at its AWS Re:Invent conference. So, what exactly did the e-tailer say? Well, Amazon alluded to the possibility of signing up with other chipset providers to deliver chips to power its AWS service. This, in effect, threatens Nvidia's place as the preferred chip  (GPU) provider to AWS. The increasing use of GPUs in machine learning/deep learning applications has been one of the key growth drivers for Nvidia, of late. Amazon did mention the use of FPGAs at the event. AWS will now allow access to FPGAs (field-programmable gate array) in a new EC2 instance type.

Will the emergence of FPGAs Hurt Nvidia's Growth Story?

But, do FPGAs threaten Nvidia's machine learning dominance? Al Hilwa, Director of software development research at IDC thinks it won't. As reported by InfoWorld, Al Hilwa thinks FPGA's will complement, not displace, GPUs. Quoting from the source:

Al Hilwa, Program Director of Software Development Research at IDC, stated in an email that FPGAs will "typically be used for highly customized compute workloads," such as "image, video and audio stream processing, often done in the context of preparing data for machine learning."

This sentiment is also echoed by Nvidia CEO Jen-Hsun Huang. In Nvidia's latest Q3 2017 earnings conference call with analysts, the NVIDIA CEO stated that while FPGAs are good in a lot of things, ASIC (application specific integrated circuit) chips have some obvious and key benefits including better performance and energy efficiency. Quoting Huang from the Q3 conference call:

FPGA is good in a lot of things, and anything that you could do in an FPGA if the market opportunity is large, you could always – it's always better to develop an ASIC. And FPGA is what you use when the volume is not large. FPGA is what you use when you're not certain about the functionality you want to put into something. FPGA is largely useful when the volume's not large, because you can build an ASIC and build a full custom chip that obviously can deliver more performance, not 20% more performance but 10 times better performance and better energy efficiency than you could using FPGAs.

Investors spooked by the comments at the AWS conference will find encouragement in what Global Equities Research Analyst Trip Chowdhry wrote in a recent investor note. The analyst picks NVIDIA as the biggest winner of the machine learning/deep learning wave as the company provides "Foundational Technology that enables Deep Learning/Machine Learning." As reported by Barron's, NVIDIA is far ahead of its competition in the machine learning/deep learning (DL/ML) race. 

Nvidia – NVDA wins irrespective of which framework wins All the above frameworks – Watson, CNTK, TensorFlow, Torch, MXNet are optimized for NVDA GPU’s using NVDA CUDA libraries – to run the training models Money is made in running the training models not so in running the inference engine Irrespective of which frameworks ultimately wins…NVDA is currently the only company that wins with the growth of Deep Learning/Machine Learning – as NVDA is powering all the production Deep Learning Training Models…NVDA Secret to Success is their CUDA libraries, which has more than 20 years lead over everyone else

Conclusion

Nvidia corporation will continue to benefit from the emergence of DL/ML as the next major tech revolution. With the company at the center of this rising wave, the recent fall triggered by AWS comments is unwarranted. Investors who believe in the future growth of AI (Artificial Intelligence) should use the latest dip in NVDA stock to accumulate more shares of the GPU market leader. Nvidia's growth story continues to remain intact and Nvidia stock will continue to rise driven by the tailwinds of accelerated growth in the broader AI space.