Long-term investment is key to sustainable returns in the stock market as it smooths out short-term volatility and brightens the core value of the company. High-tech giant nvidia (NVDA) 2.63%)) I’m on the front line Generated Artificial Intelligence (AI) Growth. But how will Nvidia respond as the hype will inevitably disappear and new opportunities like robotics and self-driving cars could turn in the sun?
Nvidia has a history of reinventing itself
NVIDIA is extremely overexposed to the AI hardware market that generates approximately 88% ($30.8 billion) of revenue from the data center segment. This underestimation is a high-tech company, especially as clients continue to lose money on AI projects and new, low-cost rivals like China’s deep seas, causing shareholders to question the industry’s long-term profit potential. It puts the giant in a dangerous position.
With the growing popularity of custom chips, major AI clients such as Openai can bypass Nvidia and design their own hardware through partnerships with fab companies such as Taiwan Semiconductor Manufacturing.
But generative AI now rules the Nvidia narrative, but it hasn’t always been like this. The company has a history of changing its focus to tackle new trends. In recent years, video games and cryptomining hardware (NVIDIA’s gaming segment) have been around 46% of total revenue ($12.46 billion) as AI-related growth overshadowed these once important opportunities. ) was expressed.
Nvidia’s rapid business transformation highlights the versatility of its core technology. Graphic Processing Unit (GPU), a type of computer chip that uses parallel processing to perform multiple calculations simultaneously. And over the next decade, investors should expect to continue to find new uses even as demand related to GPU-generated AI slows down. Robotics and self-driving cars look promising.
Self-driving cars and robotics?
Autonomous driving could generate revenues of between $300 billion and $400 billion by 2035, according to analysts at McKinsey & Company. Software as a Service (SaaS). And like generative AI, self-driving cars need to process large amounts of data quickly and accurately, making the industry a potential gold mine for NVIDIA and its industry-leading GPUs.
Tesla is a good example of the potential scale of opportunities. Despite not offering the well-known Generated AI Leading Language Model (LLM), the automaker is one of Nvidia’s major customers. It builds a Dojo supercomputer designed to accumulate tens of thousands of GPUs and become the brain behind its fully automated driving (FSD) platform.
Nvidia is also setting up a direct role in the automotive industry through software like Drive AGX, which is designed synergistically with hardware to enable autonomous driving capabilities and process drive data. .
Image source: Getty Images.
As of the third quarter, Nvidia’s Automotive and Robots segment generated sales of $449 million. This is a decline compared to bucket’s total revenue of $35 billion, but this segment grew 72% year-on-year. Investors can expect that increase to accelerate over the next decade.
Would you like to buy nvidia stocks?
The generative AI boom has been getting longer in the teeth, and Nvidia’s GPU demand could ultimately slow down as companies are looking for cheaper alternatives. However, in the long run, new opportunities such as robotics and self-driving cars may pick up slack.
That said, buying Nvidia at the height of the current hype cycle is not a good idea. Investors may want to wait for more information before considering a position within the stock.
Will Ebiefung is not in a position with any of the stocks mentioned. Motley Fool has been working and recommending Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. Motley Fools have a disclosure policy.
