Hewlett Packard Enterprise (HPE) is doubling down on AI, announcing several AI and cloud-computing offerings, which includes an expanded partnership with Nvidia (NVDA). Yahoo Finance Executive Editor Brian Sozzi is joined by HPE CEO Antonio Neri at the ongoing HPE Discover event taking place in Barcelona.

Neri says the expanded partnership will "now address the need of enterprise” and will eventually allow customers to use existing HPE infrastructure to help customers develop their own AI models using their own data.

When it comes to the future of AI, Neri sees an opportunity for AI to be used in an “ethical and responsible way,” noting how remarkable the pace of AI technology growth has been.

Taking a closer look at the company’s portfolio, Neri insists that the goal is to always look for “how to accelerate value” for shareholders. Maximizing value and cashflow is the name of the game, according to Neri, laying out “three, distinct growth engines” of the company: Intelligent edge, hybrid cloud, and AI.

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Video Transcript

BRIAN SOZZI: More and more companies are doubling down on future of AI and Hewlett Packard Enterprise is no exception. At HPE Discover, Barcelona, the company announced several AI and cloud computing offerings, including an expanded collaboration with NVIDIA. Hewlett Packard Enterprise CEO Antonio Neri joins me now from Barcelona.

Antonio, busy week for your company. Thanks for making a few-- taking a few moments for us here. So let's start on this partnership with NVIDIA. What exactly did you announce?

ANTONIO NERI: Well, good morning, Brian. Thanks for having me. We're just wrapping up another amazing HPE Discover event here in beautiful Barcelona. I can tell you, it was an incredible week for us. We engaged more than 3,000 customers. And obviously, the biggest news was the expanded partnership with NVIDIA.

Two weeks ago, almost three weeks ago now, we actually announced a turnkey solutions with NVIDIA at the time for what we call the mobile developers. And this is all about helping us elevate mobile training with our supercomputing technologies, including networking fabric and our software and the NVIDIA Grace Hopper H 200 and their software.

Now, here in Barcelona, we expanded our partnership to now address the needs of enterprise. And think about it this way in the context of the AI life cycle. We have mobile developers that are training models, but enterprises are going to fine tune those models with their data. And they want to do it in a secure, private, and safe way.

And what we did with NVIDIA is announce a specific enterprise turnkey solution that actually leverages our portfolio, including HP GreenLake in order to deploy an AI native architecture on-prem so they can leverage the cloud native world where all the data is with an AI native world on-prem, so they can speed time to value. Very exciting.

BRIAN SOZZI: For the layperson out there, Antonio, what is this deal with NVIDIA? What is that-- how does it change your financial outlook over the next two years?

ANTONIO NERI: I mean, it's an acceleration of what we're doing. If you recall, Brian, over the last five years, have been talking about the transformation enterprises are going through. And I said that enterprises of the future will be edge-centric, cloud-enabled, and data-driven. It's saw results at the end of 2023 early this week. We had a massive acceleration of the edge. Now, represent 20% of the company revenue, almost 50% company profit.

We enacted HP GreenLake, which is a hybrid cloud platform to accelerate deployment of cloud everywhere across the enterprise. And now, we are in that data-driven journey. And together with NVIDIA, we bring enormous expertise. We have a partnership for decades, where basically we have been addressing supercomputing requirements.

Now, we're going to democratize that with our technology and our solutions, including our services expertise, which is an incremental-- critical component of what customer needs to democratize AI and leverage this amazing technology to accelerate business transformation.

So think about our results in '23. At the beginning of the year, we had less than $100 million in AI orders. At the end of '23, we actually booked $3.6 billion. So 10 months, huge growth.

BRIAN SOZZI: Yeah, and just playing off that number, Antonio, and maybe it's hard to explain. At least, I find it hard to explain. Things just feel like they're moving very fast in AI compared to where they were a week ago, two weeks ago, three months ago. And I bring that up because Jensen this week said, we're almost arriving at that point where five years from now, a lot of AI solutions or computing processes will be on par with the human mind. I mean, do you share that sentiment?

ANTONIO NERI: I agree with Jensen. And Jensen and I meet regularly, almost on several weeks, not any more months. And the reason why is because we believe on the opportunity. We believe on the use of this technology in an ethical and responsible way. But at the same time, the pace of the innovation we are seeing have never seen before.

Think about when Mobile came along. Think about when Web 1.0 came along. It took several years, maybe decade, a decade or so. This is happening now weekly and monthly to a pace that we haven't seen. So I believe we're going to achieve major breakthroughs over the next several months. Think about ChatGPT 3 as an example. It was in the hundreds of billions of parameters. Now, it's over a trillion parameters. But ultimately, as the model becomes more intelligent context aware, we're going to achieve new breakthroughs in ways we haven't imagined before.

BRIAN SOZZI: What is a breakthrough in AI look like for next year?

ANTONIO NERI: Well, I think we see several trends, right? So as we think about the convergence of what I call cloud native and AI native worlds, in AI specifically, I see the convergence of generative AI with simulation and modeling. Historically, we used simulation and modeling to address some specific requirements where it was kind of simulate what testing would look like or a manufacturing process would look like. It was more about creating digital twins for the physical world.

But now, with generative AI, we give a lot of intelligence to that. And therefore, we can accelerate the outcome of these models and provide automation and decision making capabilities. The question is, how far do you want to go with that decision making? And this is why there is a step between training and tuning, which we call prompt engineering, which in some cases like you do with your ChatGPT, if you want, you just enter a prompt, and it gives you an answer.

But in the future, you can actually automate that prompt engineering based on requirements. And you can actually automate that execution, if you will, right, through the inferencing side. So we think about this not just in the context of large language models. We think about this in the context of molecular docking foundation model, climate research, simulation and modeling, diffusion.

Things are actually probably for the society, easy to understand than just a large language model. But this convergence happening right now. And we as the market leader in supercomputing, we see that convergence, which actually creates a massive opportunity for us because this is an inflection point where HPE is uniquely positioned with intellectual property and expertise to capture that moment.

BRIAN SOZZI: Each time we have talked this year, Antonio, I have come away thinking increasingly that HPE is a really strong play on AI and where AI is going. And I think this conversation just furthers that thought along. As the CEO of HPE, do you look at your portfolio and think, maybe there's certain areas we no longer need to play in. And these parts of the business are not where we're going into the future, and maybe we shouldn't have them in our portfolio.

ANTONIO NERI: We always-- as my fiduciary duty and the fiduciary duty of our board, to always look how we can accelerate value for our shareholders. It is a context where to invest money, where we divest, where it makes no sense, and ultimately, where are we going to grow as I think about three, five, 10 years out. And as you know, it is because multiple times, all comes down to relevancy. It's not just financial engineering, and that's why a strategy that's innovation-driven is the core.

So as I think about our business-- we have five businesses, right, the compute business, the traditional server business is very commoditized. But give us scale, and honestly, give us a lot of free cash flow that we directly contribute back to shareholders, or we use to invest in growth engine. And I see three distinct growth engine for us. One is the intelligent edge. And you see the results, which actually created an incremental $2 billion in just 18 months. And actually, the massive operating profit. So that, to me, is the core fabric of the company is the networking layer.

The second is the hybrid cloud. And as you saw in our 2020 results, we went from very little to $30 billion in total contract value in less than six years. And that's the foundation for which we create the data, manage the data. And now, we can accelerate with the third growth engine, which is AI.

And we have the expertise to do so. But also, we need to allocate capital correctly. And I think about the results of 2023, we actually delivered a record breaking performance in non-GAAP diluted earnings per share and free cash flow in the history of the company. So we are on the right path. But it is always about that discipline of loan or return on invested capital.