nvidia(NASDAQ: NVDA ) was founded in 1993, and went on to create the world’s first graphics processing units (GPUs) for computing, media 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 that data center operators will spend $1 trillion over the next four years upgrading their infrastructure to meet the demand from AI developers. Since the data center segment currently accounts for 88% of Nvidia’s total revenue, this spending will be instrumental in the company’s future success.
However, the semiconductor industry has always been cyclical, so the data center boom will not last forever. That’s why it’s important for Nvidia to diversify its revenue streams, and at the CES 2025 technology conference on January 7, Huang delivered some great news for investors on that front.
Image source: Nvidia.
Nvidia noticed The autonomous driving revolution is coming In fact, the company’s automotive business is more than two decades old, but its revenues were so small that it was overshadowed by the gaming and data center segments. That’s all about to change, as global car brands like Mercedes-Benz, Hyundai, BYD, Volvo, toyotaAnd others are embracing Nvidia’s Drive platform to power their autonomous ambitions.
Drive provides all the internal hardware and software that a car needs for self-driving capabilities. This includes Nvidia’s latest chip called Thor, which processes all the data coming from the car’s sensors to determine the best course of action on the road. But Nvidia’s opportunity doesn’t end there, as it also sells the infrastructure a car company needs to maintain and improve its autonomous models, so it can differentiate itself from the competition.
In addition to Drive, Huang says car companies are buying DGX data center systems featuring its latest Blackwell-based GB200. GPUswhich provide the computing power needed to continuously train the self-driving software. Then there’s Nvidia’s new Cosmos multimodal foundation model, which allows companies to run millions of real-world simulations using synthetic data, serving as training material for the software.
Overall, Huang says autonomous vehicles could be the first multitillion-dollar opportunity in the emerging robotics space. He’s not alone, as Cathy Wood’s Arc Investment Management thinks technologies like autonomous ride-hailing could create $14 trillion in enterprise value by 2027, with most of that value attributed to autonomous platform providers — in this case, Nvidia. will be
Nvidia’s fiscal year 2025 will end at the end of January, but the company generated $1.1 billion in automotive revenue in the first three quarters (if we extrapolate that result, full-year revenue would be about $1.5 billion). Huang says that in fiscal 2026, Nvidia’s automotive revenue could reach $5 billion, so it’s going to grow very quickly.
Wall Street’s consensus forecast (provided by Yahoo) suggests that Nvidia could generate $196 billion in total revenue during fiscal 2026, so the potential $5 billion contribution from the automotive segment would still be relatively small. It’s a long-term story that could secure 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 GPU 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 based on the Hopper architecture, which shows how fast Nvidia’s business is evolving.
The GB200 NVL72 system is capable of AI inference 30 times faster than the equivalent H100 GPU system, so Blackwell will pave the way for the most advanced AI models to date. So, in the next year or so, consumers and businesses may have access to the “smartest” AI software applications ever (such as chatbots and virtual assistants).
Demand for Blackwell chips is outstripping supply, which should support further strength in Nvidia’s revenue and earnings through fiscal 2026. Also, some reports suggest that a Blackwell successor dubbed “Rubin” could be introduced later in the year, which would further strengthen the company’s push. The market for data center GPUs.
Nvidia stock is up 830% since the start of calendar year 2023, increasing the company’s value from $360 billion to $3.3 trillion in just two years. Despite the great run, the stock may still be cheap.
It currently trades at a price-to-earnings (P/E) ratio of 53.6, a discount from its 10-year average P/E ratio of 59. But according to Wall Street consensus estimates, Nvidia could generate $4.44 in earnings per share. in fiscal 2026, keeping its forward P/E ratio at just 30.6.
In other words, Nvidia stock would have to rise 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 it’s possible the stock has more upside potential. On the flip side, some competition is emerging such as other chipmakers Advanced Micro Deviceswhich plans to release a Blackwell rival in a few months. This is a risk investors should keep an eye on as the year progresses.
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Anthony De Pizio No positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends BYD Company. Motley Fool has a Disclosure Policy.
