NVIDIA(NASDAQ: NVDA) was founded in 1993 and went on to create the world’s first graphics processing units (GPUs) for computing, multimedia and gaming applications. Now, decades later, the company has adapted those powerful chips for data centers, where they are used to develop advanced artificial intelligence (AI) models.
Nvidia CEO Jensen Huang believes data center operators will spend $1 trillion over the next four years upgrading their infrastructure to meet demand from AI developers. With the data center segment currently accounting for 88% of Nvidia’s total revenue, that spending will be critical to the company’s future success.
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, and at the CES 2025 technology conference on Jan. 7, Huang delivered incredible news to investors on that front.
Image source: Nvidia.
Nvidia saw the autonomous driving revolution coming. In fact, the company’s automotive business is more than two decades old, but its revenue was so small that it lived in the shadows of the gaming and data center segments. That’s all about to change, because global car brands like Mercedes-Benz, hyundai, BYD, volvo, toyotaand more are adopting Nvidia’s Drive platform to fuel their autonomous ambitions.
Drive provides all the internal hardware and software a car needs for its self-driving capabilities. That includes Nvidia’s latest chip called Thor, which processes all incoming data from the car’s sensors to determine the best course of action on the road. But Nvidia’s opportunity doesn’t end there, because it also sells the infrastructure that a car company needs to maintain and improve its autonomous models, so that it can differentiate itself from the competition.
In addition to Drive, Huang says automotive companies are purchasing DGX data center systems with their latest Blackwell-based GB200 GPUs, which provide the computing power needed to continuously train self-driving software. Then there’s Nvidia’s new Cosmos multimodal core model, which allows companies to run millions of real-world simulations using synthetic data, which serves as training material for the software.
Overall, Huang says autonomous vehicles could be the first multibillion-dollar opportunity in the emerging robotics space. You’re not alone, because Cathie Wood’s Ark Investment Management believes technologies like autonomous transportation could create $14 trillion in enterprise value by 2027, and most of that value would be attributed to autonomous platform providers (in this case, it would be Nvidia).
Nvidia’s fiscal 2025 will end at the end of January, but the company generated $1.1 billion in automotive revenue during the first three quarters (if we extrapolate that result, full-year revenue will likely be around $1.5 billion). Huang says that in fiscal 2026, Nvidia’s automotive revenue could rise to $5 billion, so it will grow incredibly fast.
The Wall Street consensus forecast (provided by Yahoo) suggests that Nvidia could generate a whopping $196 billion in total revenue during fiscal 2026, so the potential $5 billion contribution from the automotive segment still remains. It would be relatively small. It’s a longer-term story that could ensure Nvidia’s future growth, but in the here and now, it’s all about the data center.
Nvidia has just started shipping its new Blackwell GB200 GPUs to customers, but sales are expected to grow quickly. By April of this year, revenue from Blackwell chips could surpass revenue from the previous generation of chips built with the Hopper architecture, underscoring how quickly Nvidia’s business is evolving.
The GB200 NVL72 system is capable of performing AI inference up to 30 times faster than the equivalent H100 GPU system, paving the way for the most advanced AI models to date. Therefore, over the next year, consumers and businesses could have access to the “smartest” AI software applications (such as chatbots and virtual assistants) yet.
Demand for Blackwell chips is outpacing supply, which should support further strength in Nvidia’s revenue and earnings through fiscal 2026. Additionally, some reports suggest that a Blackwell successor called “Rubin” could be introduced later this year , which would further consolidate the company’s control over the data center GPU market.
Nvidia shares have soared 830% since the start of calendar year 2023, raising the company’s value from $360 billion to a staggering $3.3 trillion in just two years. Despite the surprising run, the stock may still be cheap.
It currently trades on a price-to-earnings (P/E) ratio of 53.6, which is a discount 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, putting its forward P/E ratio at just 30.6.
In other words, Nvidia stock would have to skyrocket 92% over the next 12 months just to trade in line with its 10-year average P/E ratio of 59.
Nvidia has a habit of beating Wall Street forecasts, so the stock may have even more upside potential. On the other hand, some competition is emerging from other chip manufacturers such as Advanced microdeviceswhich plans to launch a Blackwell rival in a few months. That’s a risk investors should watch out for as this year progresses.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
Jensen Huang Just Delivered Incredible News for Nvidia Stock Investors was originally published by The Motley Fool
