Nvidia (NVDA 3.10%) Founded in 1993, the company developed the world’s first graphics processing unit (GPU) for computing, media and gaming applications. Now, decades later, the company has adapted these powerful chips to 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 on infrastructure upgrades to meet the demands of AI developers. The data center division currently accounts for 88% of Nvidia’s total revenue, so its spending will contribute to the company’s future success.
However, the semiconductor industry is always cyclical, so the data center boom won’t 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 announced some surprising news to investors on that front.
Image source: Nvidia.
Introducing Nvidia’s next multi-trillion dollar opportunity: self-driving cars
Nvidia foresaw the self-driving revolution coming. In fact, the company’s automotive business has been around for more than 20 years, but its revenues have been very small and overshadowed by its gaming and data center divisions. That’s all about to change, as global car brands such as Mercedes-Benz, Hyundai, BYD, Volvo, and Toyota adopt Nvidia’s Drive platform to power their autonomous driving ambitions.
Drive provides all the internal hardware and software required for the car’s self-driving capabilities. It includes Nvidia’s latest chip called Thor, which processes all the data it receives from the car’s sensors to determine the best course of action on the road. But NVIDIA’s opportunities don’t end there. NVIDIA also sells the infrastructure that car companies need to maintain and improve their self-driving models, which helps differentiate them from competitors.
In addition to Drive, the auto company is purchasing DGX data center systems with the latest Blackwell-based GB200 GPUs, providing the computing power needed to continuously train self-driving software, Huang said. We provide. Additionally, there’s Nvidia’s new Cosmos multimodal foundation model. This allows companies to run millions of real-world simulations using synthetic data, which serves as training material for the software.
Overall, autonomous vehicles could be the first multitrillion-dollar opportunity in the emerging robotics space, Huang said. Cathie Wood’s Ark Investment Management believes that technologies such as self-driving ride-hailing could create $14 trillion in enterprise value by 2027, with much of that value going to self-driving platform providers (in this case He’s not alone, as he thinks it’s caused by Nvidia.
Nvidia’s fiscal year 2025 ends at the end of January, but the company generated $1.1 billion in auto revenue through the first three quarters (extrapolating that result to full-year revenue likely around $1.5 billion). Sho). Huang said Nvidia’s auto revenue could soar to $5 billion in fiscal 2026, and it would grow very quickly.
At present, data center chips are the mainstay.
According to Wall Street Consensus Forecasts (provided by Yahoo), NVIDIA could generate a whopping $196 billion in total revenue during fiscal year 2026, so the auto division’s potential contribution is $50. Billion dollars will still be relatively small. This is a long-term story that could secure Nvidia’s future growth, but for now, it’s all about data centers.
Nvidia has just started shipping its new Blackwell GB200 GPUs to customers, but sales are expected to increase quickly. By April of this year, revenue from Blackwell chips could overtake revenue from previous generation chips built on the Hopper architecture, highlighting how rapidly Nvidia’s business is evolving. I’m doing it.
The GB200 NVL72 system can run AI inference up to 30x faster than comparable H100 GPU systems, paving the way for Blackwell’s most advanced AI models to date. So over the next year or so, consumers and businesses may have access to some of the “smartest” AI software applications ever (such as chatbots and virtual assistants).
Demand for Blackwell chips exceeds supply, which should support further strong sales and earnings for NVIDIA during fiscal 2026. Additionally, some reports suggest that a Blackwell successor called Rubin could be announced later this year, which could further tighten the company’s financial grip. Data center GPU market.
Despite the impressive performance, it’s probably not too late to buy Nvidia stock
Nvidia’s stock price has soared 830% since the start of the 2023 calendar year, increasing the company’s value from $360 billion to an eye-popping $3.3 trillion in just two years. Despite the impressive performance, the stock may still be cheap.
Currently, the company’s price-to-earnings ratio (PER) is 53.6 times, which is cheap compared to the average P/E ratio of 59 times over the past 10 years. However, Wall Street consensus estimates suggest that NVIDIA could generate earnings of $4.44 per share. The forward P/E ratio for FY2026 is only 30.6x.
In other words, NVIDIA’s stock would need to rise 92% over the next 12 months for it to trade in line with its 10-year average P/E of 59x.
Nvidia has a tendency to beat Wall Street’s expectations, so the stock could potentially rise further. Meanwhile, some competition has emerged from other chipmakers, such as Advanced Micro Devices, which plans to release rival products to Blackwell in the coming months. This is a risk investors should keep an eye on as the year progresses.
