When the Graphic Processing Unit (GPU) maker NVIDIA (NASDAQ: NVDA) reported the results for the second quarter of 2018, concerns about slow growth left the headlines again. This time the decline was caused by the sudden disappearance of the company's cryptocurrency mining, a major contributing factor to the 2017 successful campaign.
Do not worry, though. NVIDIA prepares a new graphics technology that can help establish a new point of sale and keep that growth machine chugging together. It's called ray tracing, and while video players have been thrilled for their appearance for a while, here's why that matters to investors.
What is ray tracing?
Computer-generated graphics have improved over the years, and NVIDIA believes that radiation tracking is the next major breakthrough. While many games look quite realistic, one thing has to keep them back from real life-like images (like what you see in the movies), to do with light.
It's because video games operate in real-time interactive worlds, without two experiences being identical. Thus game developers develop light using a method called rasterization. In layman's terms, there is a shortcut that makes 3D objects as two-dimensional pixels and shades them on the basis of lighting in the game. It reduces the need for massive computing power and has become quite good at providing high quality images.
Ray tracing, however, goes away with rasterization, instead using the same technique that our eyes and mind use to reproduce what we see in the real world. Light hits 3D objects and creates shadows, reflections and reflections, changes the colors we see and the light intensity in different areas of an environment. The use of 3D objects and their real interaction with a beam of light requires much more computational power, especially in real time. NVIDIA performs it with artificial intelligence (AI) powered by dedicated processors embedded in its new GPUs.
What will it do?
NVIDIA says that the new GPUs with ray tracing capabilities are their biggest breakthrough in a decade. They have called the architecture of these new chips, "Turing", which will be the basis for a new series of NVIDIA products in the future.
These new GPUs will run next-generation video games, those who NVIDIA believes will compete with the best artistic work seen on the movies. It's good news for players, but the ability of these small cards can also help open up the visual effects industry, which is largely used in Hollywood these days.
Why does it matter?
Gaming is still growing, and live e-sports are especially on the rise as an emerging spectator event. Ray-tracing GPUs can help bridge the gap between true and digital, while better graphics can help attract more video game users over time.
The really interesting use for ray tracing is show business, though. NVIDIA says the visual power industry generates $ 250 billion a year. However, those who are familiar with visual effects know that ray tracing has been part of the process for a while already.
Today, digital artists take the time to create scenes and press computer power to a server or rendering farm to create special effects and computer-engineered scenes. The process is expensive (think thousands of dollars or more for just one scene) and it may take days or weeks to complete.
NVIDIA's work with GPUs that can handle beam tracking can be a disturbance of this industry, saving movie makers time and money. It can also open the door for artists to become entrepreneurs in the room again, and put the heavy computing forces into a server into a compact and affordable package. For investors, NVIDIA could have found yet another application for its GPUs. NVIDIA is at a pace to exceed $ 12 billion in revenue this year. Going into the $ 250 billion visual effects industry can go a long way toward unlocking more growth in the near future.