Nvidia(NASDAQ: NVDA) was founded in 1993, and it went on to create the world’s first graphics processing units (GPUs) for computing, media, and gaming applications. Now, many years later, the corporate has adapted those powerful chips for data centers, where they’re used to develop advanced artificial intelligence (AI) models.
Nvidia CEO Jensen Huang believes data center operators will spend $1 trillion over the following 4 years on upgrading their infrastructure to satisfy demand from AI developers. Because the data center segment currently accounts for 88% of Nvidia’s total revenue, that spending will probably be instrumental to the corporate’s future success.
Nevertheless, the semiconductor industry has at all times been cyclical, so the information center boom won’t last endlessly. That is why it is vital for Nvidia to diversify its revenue streams, and on the CES 2025 technology conference on Jan. 7, Huang delivered some incredible news for investors on that front.
Image source: Nvidia.
Nvidia saw the autonomous driving revolution coming. The truth is, the corporate’s automotive business is greater than twenty years old, but its revenues were so tiny that it lived within the shadow of the gaming and data center segments. That is all about to vary, because global automotive brands like Mercedes-Benz, Hyundai, BYD, Volvo, Toyota, and more are adopting Nvidia’s Drive platform to power their autonomous ambitions.
Drive provides all of the interior hardware and software a automotive needs for self-driving capabilities. That features Nvidia’s latest chip called Thor, which processes the entire incoming data from the automotive’s sensors to find out one of the best plan of action on the road. But Nvidia’s opportunity doesn’t end there, since it also sells the infrastructure a automotive company needs to keep up and improve its autonomous models, so it might differentiate itself from the competition.
Along with Drive, Huang says automotive corporations are buying DGX data center systems featuring its latest Blackwell-based GB200 GPUs, which deliver the crucial computing power to constantly train self-driving software. Then there’s Nvidia’s latest Cosmos multimodal foundation model, which allows corporations to run hundreds of thousands of real-world simulations using synthetic data, serving as training material for the software.
Overall, Huang says autonomous vehicles might be the primary multitrillion-dollar opportunity within the emerging robotics space. He isn’t alone, because Cathie Wood’s Ark Investment Management thinks technologies like autonomous ride-hailing could create $14 trillion in enterprise value by 2027, with the vast majority of that value attributed to autonomous platform providers — on this case, that might be Nvidia.
Nvidia’s fiscal yr 2025 will finish at the top of January, but the corporate generated $1.1 billion in automotive revenue through the primary three quarters (if we extrapolate that result, full-year revenue will probably be around $1.5 billion). Huang says in fiscal 2026, Nvidia’s automotive revenue could soar to $5 billion, so it should ramp up insanely fast.
Wall Street’s consensus forecast (provided by Yahoo) suggests Nvidia could generate a whopping $196 billion in total revenue during fiscal 2026, so the automotive segment’s potential $5 billion contribution would still be relatively tiny. It is a longer-term story that would secure Nvidia’s future growth, but within the here and now, it’s all concerning the data center.
Nvidia just began shipping its latest Blackwell GB200 GPUs to customers, but sales are expected to grow quickly. By April this yr, revenue from Blackwell chips could overtake revenue from the previous generation of chips built on the Hopper architecture, which highlights how quickly Nvidia’s business is evolving.
The GB200 NVL72 system is able to performing AI inference as much as 30 times faster than the equivalent H100 GPU system, so Blackwell will pave the best way for probably the most advanced AI models up to now. Subsequently, over the following yr or so, consumers and businesses might need access to the “smartest” AI software applications (like chatbots and virtual assistants) up to now.
Demand for Blackwell chips is outstripping supply, which should support further strength in Nvidia’s revenue and earnings during fiscal 2026. Plus, some reports suggest a Blackwell successor called “Rubin” may be unveiled later within the yr, which might further cement the corporate’s chokehold available on the market for data center GPUs.
Nvidia stock has soared by 830% for the reason that start of calendar yr 2023, lifting the corporate’s value from $360 billion to an eye-popping $3.3 trillion in only two years. Despite the amazing run, the stock might still be low cost.
It currently trades at a price-to-earnings (P/E) ratio of 53.6, which is a reduction to its 10-year average P/E ratio of 59. But 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 should soar by 92% over the following 12 months simply to trade in keeping with its 10-year average P/E ratio of 59.
Nvidia has a habit of beating Wall Street’s forecasts, so it’s possible the stock has much more upside potential. On the flip side, there’s some competition emerging from other chipmakers like Advanced Micro Devices, which plans to release a Blackwell rival in a number of months. That is a risk investors should regulate as this yr progresses.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Idiot recommends BYD Company. The Motley Idiot has a disclosure policy.