Nvidia(Nasdaq: NVDA) Founded in 1993, it continues to create the world’s first graphics processing units (GPUs) for computing, media, and gaming applications. Now, decades later, the company has adapted these 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 modernizing their infrastructure to meet demand from AI developers. Since the data center segment currently represents 88% of Nvidia’s total revenue, this spending will be beneficial to 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 tech conference on January 7, Huang delivered some startling news to investors on that front.
Image source: Nvidia.
She saw Nvidia The self-driving revolution at. In fact, the company’s automotive business is more than two decades old, but its revenues have been so meager that it has lived in the shadow of its gaming and data center segments. All of that is about to change, because global car brands love it Mercedes Benz, Hyundai, BYD, Volvo, Toyotaand more are adopting Nvidia’s Drive platform to support their independent ambitions.
Drive provides all the internal hardware and software a car needs for self-driving capabilities. This includes Nvidia’s latest chip called Thor, which processes all the 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 the car company needs to maintain and improve its autonomous models, so it can differentiate itself from the competition.
In addition to Drive, Huang says auto companies are buying DGX data center systems that feature the latest Blackwell-based GB200 Graphics processing unitswhich provides the computing power necessary to continuously train self-driving programs. Then there’s Nvidia’s new multimedia Cosmos enterprise model, which allows companies to run millions of real-world simulations using synthetic data, serving as training material for the software.
Overall, Huang says self-driving cars could be the first multi-billion-dollar opportunity in the emerging field of robotics. And he’s not alone, because Cathie Wood’s Ark Investment Management believes that technologies like autonomous ride-hailing services could create $14 trillion in enterprise value by 2027, with the majority of that value being returned to autonomous platform providers — in this case, that would be Nvidia .
Nvidia’s 2025 fiscal year will end at the end of January, but the company generated $1.1 billion in automotive revenue through the first three quarters (if we extrapolate that result, full-year revenue would likely be around $1.5 billion). Huang says that in fiscal 2026, Nvidia’s automotive revenue could top $5 billion, so it’s going to go up crazy fast.
Wall Street’s consensus forecasts (provided by Yahoo) suggest that Nvidia could generate a whopping $196 billion in total revenue through fiscal 2026, so the auto sector’s potential contribution of $5 billion will 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 GPUs to customers, but sales are expected to grow quickly. By April this year, revenues from Blackwell chips could exceed revenues from the previous generation of chips built on the Hopper architecture, highlighting how quickly Nvidia’s business is developing.
The GB200 NVL72 system is capable of performing AI inference up to 30 times faster than an equivalent H100 GPU system, so Blackwell will pave the way for our most advanced AI models to date. So, within the next year or so, consumers and businesses may have access to the “smartest” AI software applications (such as chatbots and virtual assistants) yet.
Demand for Blackwell chips is outstripping supply, which should support further strength in Nvidia’s revenue and earnings through fiscal 2026. Additionally, some reports indicate that a Blackwell successor called “Rubin” may be unveiled later in the year, This would strengthen the company’s grip on the market. Data center graphics processing units market.
Nvidia shares are up 830% since the start of calendar year 2023, pushing the company’s value from $360 billion to $3.3 trillion in just two years. Despite the impressive performance, the stock may remain cheap.
It currently trades at a price-to-earnings (P/E) ratio of 53.6, which is a discount to the 10-year average P/E ratio of 59. But Wall Street estimates suggest Nvidia could post earnings of $4.44 per share. In fiscal 2026, putting the 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’s expectations, so it’s possible that the stock has greater upside potential. On the other hand, there is some emerging competition from other chip manufacturers e.g Advanced micro deviceswhich plans to launch a competitor to Blackwell within a few months. This is a risk that investors should monitor as this year progresses.
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Anthony DiBizio He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends BYD. The Motley Fool has Disclosure policy.
