ChatGPT has created fear in the minds of investors that they are missing an opportunity.
This FOMO was driven by an unexpectedly large Q2 demand for the Nvidia chips that power the machines that train and operate such large language models.
MicrosoftMSFT, GoogleGOOG, Amazon, Meta Platforms, Nvidia, Arista NetworksANET, and most of the publicly traded companies looking to profit from generative AI are now well known.
DriveNets, a provider of cloud networking software based in Raanana, Israel, is a little-known beneficiary of generative AI.
DriveNets — Help build the cloud-based network that currently handles 52% of AT&T’s core operational traffic, according to DriveNets. communication today — We anticipate strong demand for our technology from companies such as Microsoft and Google building and training LLMs.
Sadly for investors, DriveNets is still a privately held company. However, the company’s CEO told me that an IPO could be an option for him to finance growth.
(I have no financial interest in the securities mentioned in this post).
Why generative AI needs a cloud-based network
ChatGPT and other LLMs require significant processing power to design, train, and operate LLMs. This creates a huge market opportunity for network technology providers. Winners of the race for this expanding opportunity must meet strict purchasing criteria.
The cloud AI networking market is growing rapidly. Industry analyst firm 650 Group predicts that the AI cluster connectivity market will grow by a compound annual rate of 38% from 2022 to 2027, from his $2 billion to “over $10 billion.”
Because building and operating the networks required to design, train, and operate LLM is expensive, Microsoft and other hyperscalers are keen to maximize processing power.
To that end, hyperscalers try to process AI workloads on networks with no idle time. DriveNets co-founder and CEO Ido Susan explains: “AI computing resources are very expensive and must be maximized to avoid ‘idle cycles’ while waiting for networking tasks.”
DriveNet has introduced a more efficient Ethernet communication technology than InfiniBand and dominates the market. According to Susan, DriveNets’ Network Cloud-AI increases utilization of his AI computing resources, achieving up to 30% reduction in idle time.
One analyst is bullish on DriveNets’ ability to capture market share in cloud AI networking. Alan Weckel, Founder and Technology Analyst at 650 Group, said: “DriveNets is an innovator that is disrupting the traditional large-scale networking market, a distributed white-box based solution that [— which saves money by running bespoke software on commodity hardware rather than expensive, proprietary switches —] Larger network scale can be achieved at lower cost. ”
Weckel also sees DriveNets as a leader in AI networking. “They are now ready to do it again with AI networking, participate in early large-scale AI trials, [tapping into] It’s the experience they’ve gained building the world’s largest core network,” he said.
Indeed, DriveNets faces competition, including Arista Networks, which is looking to offer a hybrid approach to its customers depending on the type of application.
As Arista CEO Jayshree Ullal told me in May 2023, “We’re happy with the white box idea because we don’t want to run on other people’s hardware. It started as software.” We want to give our customers what they need. For less mission-critical applications, a white box can be used. Specialized applications such as turnkey healthcare and financial solutions require Arista. ”
Ural agrees that Ethernet is a key technology for generative AI. The amount of traffic that such networks need to carry has exploded since the 1970s, with a maximum bandwidth of 2.95 megabits per second envisioned at the time, but today the 800 megabits per second required by hyperscalers has grown exponentially. It was well below gigabits/second or more. .
Why DriveNets started and how it has grown
DriveNets was founded by Susan. He sold his first company to his Cisco Systems CSCO, where he held leadership positions where he learned valuable business lessons.
In 2015, he co-founded DriveNets to do to the network what the cloud did to compute and storage. DriveNets has helped companies like AT&T accelerate their innovation capabilities while reducing capital and operating expenses.
As Susan told me in an interview on May 25th, before launching her first company, she served in the Israeli military and focused on technology. He co-founded Intucell, his networking technology company, but Cisco bought the company in 2013 for $475 million.
He appreciates what he learned from Cisco. “Right now we are competing with Cisco. Learn how to package products.I started studying computer science and got my degree at Cisco,” he said.
DriveNets was founded to solve the high cost and innovation-inhibiting nature of network equipment that locks customers to a single vendor. Susan said: “While software, computing and data storage are moving to the cloud, networking still locks customers to a single vendor through proprietary hardware, making it more difficult for companies to move and innovate quickly. has become.”
DriveNets aimed to solve the problem by building “a next-generation, software-centric service that enables 24/7 deployment, is convenient to purchase, and changes the way networks are managed.” We help the world’s largest network owners decouple network growth from their costs,” he explained.
DriveNets has acquired a Plum client. “More than 50% of AT&T’s T network runs on our technology. They are saving 10x in capital and operating expenses. I persuaded an acquisition from us as My team is strong and made up of top industry leaders We took the time to go to the lab and prove it works I will,” Susan said.
AT&T says DriveNets has enabled more than half of its traffic to flow through an “open, non-aggregated core routing platform.” AT&T’s network core infrastructure Mike Satterley, vice president of services for AT&T, said the telecoms giant began running part of its network backbone on his DriveNets core routing software starting in September 2020. said. DriveNets has ended that support, which he expected to support all AT&T traffic by the end of 2022. This year he was 52%, according to sdxcentral.
DriveNets has raised a total of $587 million in three funding rounds. Most recently, his $262 million financing in March 2022 brought the company’s valuation to nearly his $1.6 billion. pitch book.
Susan is proud of DriveNets’ achievements. “We have tens of millions of dollars in revenue, doubling every year. Our customers are top service providers and hyperscalers. It allows us to innovate,” he said.
DriveNets Opportunity in AI Networking
DriveNets sees great opportunities in AI networking. Susan explained: “We see an opportunity in generative AI. Our fabric uses Ethernet to connect tens of thousands of GPUs to train language models at scale. Nvidia GPUs can handle 800 Gigabits, better than InfiniBand networks, which can only handle hundreds of GPUs.”
He also wants the company to go public. “My goal is for DriveNets to be a huge, unique company like VMWare, bigger than HPHPQ or Dell. Investors need to provide us with capital because we are in a large market dominated by incumbents with no innovation.It is time to disrupt them.”
Investors may want to consider carefully if DriveNets chooses the IPO route.
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