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 data center operators will spend $1 trillion over the next four years upgrading their infrastructure to meet the demand from AI developers. With the data center segment currently accounting for 88% of Nvidia’s total revenue, this 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 crucial for Nvidia to diversify its revenue streams, and at the CES 2025 tech conference on January 7, Huang delivered some amazing news for investors on that front.
Image source: Nvidia.
Nvidia has seen the autonomous driving revolution arrival. In fact, the company’s automotive business is more than two decades old, but its revenues have been so small that it has lived in the shadow of its gaming and data center segments. All that is about to change because global car brands love 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 self-driving capabilities. This 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 stop there, as it also sells the infrastructure the car company needs to maintain and improve its autonomous models, so it can differentiate itself from the competition.
Along with Drive, Huang says automotive companies are buying DGX systems for data centers that feature the latest Blackwell-based GB200 GPUswhich supply the necessary computing power to continuously train self-driving software. There’s also Nvidia’s new Cosmos multimodal core 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 multi-trillion dollar opportunity in the nascent robotics space. He’s not alone, as Cathie Wood’s Ark Investment Management believes 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, it would was 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, annual revenue is likely to be around $1.5 billion). Huang says that in fiscal 2026, Nvidia’s automotive revenue could grow to $5 billion, so it will grow incredibly fast.
Wall Street’s 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 would still be relatively small. It’s a longer-term story that could ensure Nvidia’s future growth, but 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 exceed revenue from the previous generation of chips built on the Hopper architecture, underscoring how fast Nvidia’s business is developing.
The GB200 NVL72 system is capable of performing AI inference up to 30 times faster than the equivalent H100 GPU system, so Blackwell will pave the way for the most advanced AI models to date. Therefore, over the next year, consumers and businesses could have access to the “smartest” artificial intelligence software applications (such as chatbots and virtual assistants) yet.
Demand for Blackwell chips is outstripping supply, which should support further growth in Nvidia’s revenue and earnings in fiscal 2026. In addition, some reports suggest that a successor to Blackwell called “Rubin” could be introduced later in the year, further cementing the company’s control over the data center GPU market.
Shares of Nvidia have risen 830% since the start of the 2023 calendar year, raising the company’s value from $360 billion to a whopping $3.3 trillion in just two years. Despite the incredible run, the stock could still be cheap.
It currently trades at a price-to-earnings (P/E) ratio of 53.6, a discount to its 10-year average P/E ratio of 59. But the Wall Street 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’s 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 even more upside potential. On the other hand, there is emerging competition from other chip makers Advanced micro deviceswho plans to betray a rival from Blackwell in a few months. That’s a risk investors should keep an eye on as the year progresses.
Have you ever felt like you missed out on buying the best performing stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation to companies that they think will fail soon. If you’re worried that you’ve already missed an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1000 when we doubled in 2009you would have $357,084!*
Apple: if you invested $1000 when we doubled in 2008. you would have $43,554!*
Netflix: if you invested $1000 when we doubled in 2004 you would have $462,766!*
Right now we are issuing “Double Dip” alerts for three amazing companies and there may not be another opportunity like this anytime soon.
Anthony Di Pizio has no position in any of the listed stocks. 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.
