Gaming Was Nvidia’s Largest Business. Now, 80% of Its Revenue Comes From Somewhere Else Entirely

Nvidia’s (NASDAQ: NVDA) inception aimed to revolutionize 3D computer graphics for gaming and multimedia sectors. Initially achieving success with various chips, the company made a significant leap in 1999 with the introduction of the Nvidia GeForce 256, the world’s first graphics processing unit (GPU).

This milestone had culminated in the latest GeForce RTX 40 Series, which can deliver life-like graphics to digital content with the help of Deep Learning Super Sampling (DLSS), an incredible innovation by Nvidia. DLSS uses artificial intelligence (AI) to create additional frames in a video game scene and enhance image quality.

Until fiscal 2022 (ended Jan. 30, 2022), gaming was routinely Nvidia’s largest revenue driver. The segment generated $12.5 billion in sales that year, which accounted for 46% of the company’s total revenue. But then, everything changed:

Data source: Nvidia. Chart by The Motley Fool.

Artificial intelligence is transforming the data center

Data centers used to be where companies stored valuable information, but have since evolved to become centralized hubs for online operations (otherwise known as cloud computing). Today, data centers are home to powerful chips designed by Nvidia to process AI workloads.

The shift began in 2016 when Nvidia delivered the first AI supercomputer to OpenAI, which it used to develop the early generative AI models that culminated in the famous ChatGPT online chatbot.

Now, Nvidia’s leading H100 data center GPUs sell for up to $40,000 a pop. With centralized data center operators like Microsoft and Amazon ordering hundreds of thousands of them to give cloud customers the computing power they need to develop AI.

It sent Nvidia’s data center revenue soaring 279% year over year in the fiscal 2024 third quarter (ended Oct. 29, 2023). The data center segment now accounts for 80% of Nvidia’s total revenue, leaving the gaming segment in the dust.

Nvidia is now a $1.8 trillion behemoth, and $1 trillion of that value was created in the last 12 months alone. The good news is that Nvidia stock could probably still go higher from here.

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.

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 tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of February 5, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Gaming Was Nvidia’s Largest Business. Now, 80% of Its Revenue Comes From Somewhere Else Entirely was originally published by The Motley Fool

Source link