Nvidia’s Future Looks Brighter Than Ever
A Pioneer in Graphics Processing
Founded in 1993, Nvidia revolutionized the tech industry by creating the world’s first graphics processing units (GPUs) for computing, media, and gaming applications. Today, the company has adapted those powerful chips for data centers, where they are used to develop advanced artificial intelligence (AI) models.
Data Center Boom
Nvidia CEO Jensen Huang predicts that data center operators will spend $1 trillion over the next four years on upgrading their infrastructure to meet demand from AI developers. As the data center segment currently accounts for 88% of Nvidia’s total revenue, this spending will be instrumental to the company’s future success.
Diversifying Revenue Streams
However, the semiconductor industry has always been cyclical, so the data center boom won’t last forever. That’s why it’s critical for Nvidia to diversify its revenue streams. At the CES 2025 technology conference, Huang delivered some incredible news for investors on that front.
Autonomous Driving Revolution
Nvidia saw the autonomous driving revolution coming and has been preparing for it. The company’s automotive business, which has been around for over two decades, is about to take off. Global car brands like Mercedes-Benz, Hyundai, BYD, Volvo, Toyota, and more are adopting Nvidia’s Drive platform to power their autonomous ambitions.
Drive Platform
Drive provides all of the internal hardware and software a car needs for self-driving capabilities, including Nvidia’s latest chip called Thor, which processes all of the incoming data from the car’s sensors to determine the best course of action on the road.
Infrastructure and Training
In addition to Drive, car companies are buying DGX data center systems featuring Nvidia’s latest Blackwell-based GB200 GPUs, which deliver the necessary computing power to continuously train self-driving software. Nvidia’s new Cosmos multimodal foundation model also allows companies to run millions of real-world simulations using synthetic data, serving as training material for the software.
Multitrillion-Dollar Opportunity
Huang believes autonomous vehicles could be the first multitrillion-dollar opportunity in the emerging robotics space. Cathie Wood’s Ark Investment Management thinks technologies like autonomous ride-hailing could create $14 trillion in enterprise value by 2027, with the majority of that value attributed to autonomous platform providers like Nvidia.
Rapid Growth Ahead
Nvidia’s fiscal year 2025 will finish at the end of January, but the company generated $1.1 billion in automotive revenue through the first three quarters. Huang says in fiscal 2026, Nvidia’s automotive revenue could soar to $5 billion, making it a longer-term story that could secure Nvidia’s future growth.
Data Center Dominance
In the here and now, it’s all about the data center. Nvidia just started shipping its new Blackwell GB200 GPUs to customers, but sales are expected to grow quickly. By April this year, revenue from Blackwell chips could overtake revenue from the previous generation of chips built on the Hopper architecture.
Blackwell’s Impact
The GB200 NVL72 system is capable of performing AI inference up to 30 times faster than the equivalent H100 GPU system, so Blackwell will pave the way for the most advanced AI models to date. Over the next year or so, consumers and businesses might have access to the “smartest” AI software applications so far.
Stock Performance
Nvidia stock has soared by 830% since the start of calendar year 2023, lifting the company’s value from $360 billion to an eye-popping $3.3 trillion in just two years. Despite the amazing run, the stock might still be cheap, trading at a price-to-earnings (P/E) ratio of 53.6, which is a discount to its 10-year average P/E ratio of 59.
Upside Potential
Wall Street’s consensus estimate suggests Nvidia could generate $4.44 in earnings per share in fiscal 2026, placing its forward P/E ratio at just 30.6. In other words, Nvidia stock would have to soar by 92% over the next 12 months just to trade in line with its 10-year average P/E ratio of 59. With the company’s habit of beating Wall Street’s forecasts, there’s still more upside potential.
Leave a Reply