Meet Nvidia's Next Billion-Dollar Opportunity – The Motley Fool
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Nvidia's AI growth may just be getting started.
Nvidia (NVDA 1.66%) has become the go-to destination for companies looking to build artificial intelligence (AI) programs. That’s because the tech giant offers customers the basic element, the chip, to power the most crucial of AI tasks: the training and inferencing of large language models (LLMs), so those models then can go on to carry out complex tasks.
But Nvidia isn’t just a chip designer. The company also offers complete systems, including software, to support AI projects.
All of this has translated into billions of dollars in revenue and net income, and the company has reported record earnings quarter after quarter in recent times. Investors have appreciated the performance, and this has pushed the stock to a triple-digit gain over the past year.
But companies aren’t the only ones turning to Nvidia. A new business is emerging, involving countries around the world, and it could become a new source of billion-dollar revenue for this top chip player. Let’s take a close look at Nvidia’s next big opportunity — and find out what it means for investors.
Image source: Getty Images.
Nvidia has increased its data center revenue over the past few years thanks to serving companies eager to build winning AI programs. (Nvidia’s data center segment includes all of its products and services linked to AI.) Customers are building AI platforms for a variety of reasons — from streamlining their operations to developing the next lifesaving drug. And this means Nvidia’s customers span many industries, from automotive to healthcare.
All of this helped Nvidia report a triple-digit increase in revenue in the fiscal 2025 first quarter to $26 billion, along with more than $14 billion in net income — and gross margin widened to more than 78%. This shows Nvidia’s products and services to companies are resulting in revenue growth and higher profitability.
And now, a new opportunity is just getting off the ground, promising to deliver major revenue as of this year. I’m talking about sovereign AI, or a country’s ability to build AI using its own infrastructure and systems. Nvidia chief executive officer Jensen Huang spoke of sovereign AI earlier this year at the World Governments Summit in Dubai, saying every country should create its own AI program — one specifically designed around that nation’s language and culture to better serve its needs.
Today, this focus on sovereign AI is starting to happen. Japan is a great example, announcing earlier this month that it would invest $740 million in AI through a partnership with local infrastructure providers and Nvidia. In Italy, Swisscom is building the country’s first Nvidia DGX supercomputer — the goal is to develop a LLM to train in Italian. Several other countries have announced similar plans in recent times, signaling that this idea is gaining momentum and represents a new source of revenue for Nvidia.
In fact, Nvidia says the business of sovereign AI, which didn’t exist last year so represented zero revenue, this year may result in high-single-digit billions of dollars in revenue. Today, that may not seem like a lot for the company, but here are two elements to put things into perspective.
First, as recently as in the years 2010 through 2015, Nvidia’s total annual revenue came in the range of $3 billion to $5 billion. At that time, before AI took off, Nvidia relied on its gaming customers.
Second, the potential growth of Nvidia’s sovereign AI revenue represents a huge movement in a very short period of time, a clue that Huang’s AI message is resonating with governments. And growth here may just be getting started — as countries build out infrastructure and programs, others progressively may follow their lead.
So what does all of this mean for investors?
Some have worried about Nvidia’s growth moving forward — the concern is the company can’t keep up the pace of triple-digit revenue gains forever. It’s true that demand may ebb and flow, and Nvidia’s revenue increases at certain points may weaken. But overall, there’s reason to believe this top tech company can deliver significant growth over the long term, for two reasons.
The general AI story is in its early stages today, with forecasts of a $1 trillion market by 2030. And the area of sovereign AI represents a whole new area of development for Nvidia.
All of this means that Nvidia remains a compelling long-term growth story, making the stock an excellent buy today.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.
© 1995 – 2024 The Motley Fool. All rights reserved.
Market data powered by Xignite and Polygon.io.
