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Nvidia(NASDAQ:NVDA) was founded in 1993 and went on to create the world’s first graphics processing units (GPUs) for computing, multimedia 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 estimates that data center operators will spend $1 trillion over the next four years to upgrade their infrastructure to meet demand from AI developers. Given that the data center segment currently accounts for 88% of Nvidia’s total revenue, these expenses will be instrumental 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 critical for Nvidia to diversify its revenue streams, and at the CES 2025 tech conference on January 7, Huang delivered some incredible news to investors on that front.
Image source: Nvidia.
Nvidia saw the autonomous driving revolution future. In fact, the company’s automotive business has been around for more than two decades, but its revenues were so minimal that it lived in the shadow of the gaming and data center segments. This is all about to change, as global automotive brands like Mercedes-Benz, Hyundai, BYD, Volvo, Toyotaand still others are adopting Nvidia’s Drive platform to support their autonomous ambitions.
Drive provides all the internal hardware and software a car needs for its autonomous 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 an automaker needs to maintain and improve its autonomous models, so it can differentiate itself from the competition.
In addition to Drive, Huang says automakers are buying DGX data center systems featuring its latest Blackwell-based GB200. GPUwhich provide the computing power needed to continuously train autonomous driving software. Then there’s Nvidia’s new multimodal Cosmos base model, which allows companies to run millions of real-world simulations using synthetic data, serving as training material for the software.
Overall, Huang believes that autonomous vehicles could represent the first multibillion-dollar opportunity in the emerging field of robotics. He’s not alone, as Cathie Wood’s Ark Investment Management believes technologies like autonomous ride-hailing services could create $14 trillion in enterprise value by 2027, with the majority of that value attributed to standalone platform providers – in this case it 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 in the first three quarters (if we extrapolate this result, the revenue for the entire year will probably be around $1.5 billion). Huang says that in fiscal 2026, Nvidia’s automotive revenue could climb to $5 billion, so it’s going to grow at an incredibly fast rate.
Wall Street consensus forecasts (provided by Yahoo) suggest that Nvidia could generate total revenue of $196 billion in fiscal 2026, so the potential $5 billion contribution from the automotive segment would be still relatively minimal. This is a longer-term story that could secure Nvidia’s future growth, but for 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 surpass that of the previous generation of chips built on the Hopper architecture, highlighting how quickly Nvidia’s business is evolving.
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 may have access to the “smartest” AI software applications (like chatbots and virtual assistants) yet.
Demand for Blackwell chips is outpacing supply, which is expected to support further growth in Nvidia’s revenue and profits in fiscal 2026. Additionally, some reports suggest a Blackwell successor called “Rubin” could be unveiled later this year, which would further strengthen the company’s hold on the data center GPU market.
Nvidia stock has soared 830% since the start of calendar year 2023, increasing the company’s value from $360 billion to $3.3 trillion in just two years. Despite this incredible progression, the stock could still be cheap.
It currently trades at a price-to-earnings (P/E) ratio of 53.6, which is a reduction from its 10-year average P/E ratio of 59. But the Wall Street consensus estimate suggests that 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 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 history of beating Wall Street forecasts, so it’s possible the stock has even more upside potential. On the other hand, other chipmakers, like Advanced microdeviceswho plans to release a Blackwell rival in a few months. This is a risk that investors should keep an eye on as this year progresses.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends BYD. The Motley Fool has a disclosure policy.
