IBM Extends NVIDIA Collaboration for AI Scalability: Stock to Gain?

International Business Machines Corporation IBM has extended its collaboration with NVIDIA Corporation NVDA to scale AI (artificial intelligence) workloads and agentic AI applications. Per the latest agreement, IBM aims to launch a content-aware storage (CAS) capability for its hybrid cloud infrastructure offering (dubbed IBM Fusion) and expand its watsonx integrations with NVIDIA while introducing new IBM Consulting capabilities. 

The companies will collaborate to provide hybrid AI solutions to business enterprises that capitalize on open technologies and platforms, supporting data management, performance, security and governance. The CAS capability will enable firms to extract the hidden meaning of unstructured data for inferencing to scale and enhance AI applications without compromising on security. The integration of watsonx with NVIDIA Inference Microservices will offer greater accessibility to firms to leading AI models across multiple cloud environments.

Together, the companies will help clients transform and govern end-to-end business processes with agentic AI applications and monetize AI for real business outcomes. In addition, the collaboration will help manage compute-intensive AI workloads across an optimized network fabric to overcome operational silos with an intelligent, scalable system that drives near real-time inference for responsive AI reasoning.

watsonx: IBM’s Core Technology Platform

IBM’s watsonx platform is likely to be the core technology platform for its AI capabilities. watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive. This enterprise-ready AI and data platform comprises three products to help organizations accelerate and scale AI: the watsonx.ai studio for new foundation models, generative AI and machine learning, the watsonx.data fit-for-purpose data store built on an open lake house architecture and the watsonx.governance toolkit to help enable AI workflows to be built with responsibility and transparency.

IBM Rides on Solid Hybrid Cloud Traction

IBM’s growth is expected to be driven primarily by analytics, cloud computing and security in the long haul. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which has led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This, in turn, has led to healthy demand for IBM hybrid cloud solutions, resulting in an uptrend in revenues in recent years.

The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM RedHat’s portfolio, bringing additional functionalities for cloud infrastructure management. The integration of HashiCorp’s cloud software capabilities has bolstered IBM’s hybrid multi-cloud approach. The acquisitions of StreamSets and webMethods have also improved IBM’s AI platform and automation capabilities, bringing together key competencies in integration, API management and data ingestion. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts have enabled IBM to develop comprehensive application and data integration platforms in the industry.

Will IBM Stock Benefit From This Collaboration?

IBM aims to benefit from the increasing propensity of business enterprises to undertake a cloud-agnostic and interoperable approach to secure multi-cloud management with a diligent focus on hybrid cloud and AI solutions. A better business mix, along with improvements in operating leverage through productivity gains and increased investments in growth opportunities, will likely drive its profitability.

The extended collaboration with NVIDIA is likely to generate incremental revenues for IBM, propelling its stock momentum. The stock has gained 27.3% over the past year against the industry’s decline of 9.3%.

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Zacks Rank & Stocks to Consider

IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experiences. Arista delivered an earnings surprise of 12.9%, on average, in the trailing four quarters. It is well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations. 

Ubiquiti Inc. UI, sporting a Zacks Rank #1, offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. Its service-provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing, while enterprise product platforms provide wireless local area network infrastructure, video surveillance products and machine-to-machine communication components. In the trailing four quarters, it delivered an earnings surprise of 7.5%.

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This article originally published on Zacks Investment Research (zacks.com).

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