Nvidia (NASDAQ: NVDA) stock has soared over the past five years as the company solidified its dominance in the high-growth artificial intelligence (AI) chip market. The tech giant holds about 80% of that market thanks to the power of its graphics processing units (GPUs) — their ability to process multiple tasks simultaneously makes them perfect for critical AI tasks like the training of models.
Sales of chips and other AI products and services has helped Nvidia grow its data center revenue in the triple digits to record levels. In the most recent quarter, revenue from that business topped $26 billion. This is huge, considering that revenue for the entire company totaled $27 billion as recently as fiscal 2023.
After such earnings and stock performance, though, you may be wondering if it’s too late to get in on this AI player and if the biggest opportunity for gains has passed. It’s impossible to predict with 100% accuracy whether Nvidia will repeat its past performance. But it is fair to say earnings growth drivers not only still exist but have multiplied — and as earnings soar, so could the stock price. Let’s check out four billion-dollar reasons to buy Nvidia now — each is set to add major growth to Nvidia’s top line moving forward.
1. Nvidia’s growing strengths in networking
Nvidia has generally stood behind its InfiniBand platform for networking, or the transmission of data across various devices. But Ethernet networking remains more broadly used due to compatibility across device types. Not to be left out, Nvidia launched its Spectrum-X Ethernet platform last year, a move that allows the company to continue to grow InfiniBand and gain ground in the Ethernet market too.
In the most recent quarter, Nvidia’s Ethernet for AI revenue doubled from the previous quarter as “hundreds of customers” signed on for the company’s Ethernet offerings. In fact, Spectrum-X is set to become a multibillion-dollar range of products after just one year of commercialization. And since the company aims to release new Spectrum-X products every year, there’s reason to be optimistic about future growth.
2. Nvidia is leading the way in sovereign AI
Sovereign AI refers to a country’s ability to generate AI through its own infrastructure and resources — it’s particularly valuable because it means a nation can preserve and harness the strengths of its culture, traditions, language, and more.
This new area represented zero revenue for Nvidia last year, but this year it’s already on its way to delivering revenue in the low-double-digit billions. Examples of Nvidia’s work in the area include projects to build supercomputers with Japan and Italy — and even a project with a French company to build Europe’s biggest supercomputer.
Nvidia spoke about the importance of sovereign AI as the movement began, and it’s clear the opportunity could bring in major revenue as various nations launch projects — and turn to Nvidia for help.
3. Nvidia is a key player in the development of autonomous vehicles
When Nvidia announced the upcoming release of its new Blackwell architecture and chip, Tesla chief executive officer Elon Musk‘s comment illustrated the importance of the chip designer in his industry: “There is currently nothing better than Nvidia hardware for AI,” Musk said. On top of this, Oracle co-founder Larry Ellison recently said he and Musk begged Nvidia for more chips during a meeting with CEO Jensen Huang — Nvidia has said demand for its GPUs has surpassed supply.
The automotive industry was a big growth driver for Nvidia during the recent quarter because every developer of self-driving technology is using Nvidia products. The company predicts the industry will result in “multibillion dollars” in revenue — and this revenue will climb as more and more compute is needed for next-generation vehicles.
4. AI could transform healthcare, with the help of Nvidia
AI may revolutionize many areas, but Nvidia’s Huang predicts the technology will make the biggest mark on healthcare. At the company’s GTC conference earlier this year, Huang highlighted that Nvidia is already present in various specialties — from imaging to gene sequencing and robotics.
At the conference, Huang announced the launch of about two dozen new services spanning the areas of imaging, speech recognition, and drug discovery. And in the recent earnings report, Nvidia said healthcare is “on its way” to becoming a multibillion-dollar business for the company.
All of these elements show us that Nvidia’s revenue growth has much farther to go. And each of these areas represents a long-term opportunity, meaning we’re not just talking about a quarter or two of revenue growth but growth that could persist over time. And that’s why these are four fantastic billion-dollar reasons to buy Nvidia stock today.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $744,197!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 30, 2024
Adria Cimino has positions in Oracle and Tesla. The Motley Fool has positions in and recommends Nvidia, Oracle, and Tesla. The Motley Fool has a disclosure policy.
4 Billion-Dollar Reasons to Buy Nvidia Stock Right Now was originally published by The Motley Fool
