4 Billion-Dollar Reasons to Buy Nvidia Stock Now

Nvidia (NVDA -3.66%) the company’s shares have surged over the past five years as the company has consolidated its dominance in the rapidly growing artificial intelligence (AI) chip market. The tech giant holds around 80% of this market thanks to the power of its graphics processing units (GPU) – their ability to process multiple tasks simultaneously makes them ideal for key artificial intelligence tasks such as training models.

Sales of chips and other artificial intelligence products and services helped Nvidia grow its data center revenue by triple digits to record levels. In the last quarter, revenue from this business exceeded $26 billion. This is a huge number, considering that the company’s entire revenue in fiscal year 2023 was $27 billion.

However, after earnings and stock performance like this, you may be wondering if it’s too late to get involved with this AI player and if the biggest opportunity for profits has already passed. It is impossible to predict with 100% accuracy whether Nvidia will repeat its past achievements. However, it’s safe to say that the drivers of earnings growth not only still exist, but have multiplied, and as earnings grow, the share price can rise. Let’s check out four billion-dollar reasons to buy Nvidia now – each of which is designed to significantly increase Nvidia’s revenues in the future.

1. Nvidia’s growing advantages in the network

Nvidia generally favors its InfiniBand platform for networking, i.e. data transmission between different devices. However, Ethernet remains more widely used due to its compatibility between different types of devices. Not to be left out, Nvidia released the Spectrum-X Ethernet platform last year, which allows the company to continue developing InfiniBand AND also gain popularity in the Ethernet market.

In the latest quarter, Nvidia’s Ethernet for AI revenue doubled from the previous quarter as “hundreds of customers” signed up for the company’s Ethernet offering. In fact, Spectrum-X will become a multi-billion dollar product range after just one year of commercialization. And with the company aiming to release new Spectrum-X products every year, there is reason to be optimistic about future growth.

2. Nvidia leads in sovereign AI

Sovereign AI refers to a country’s ability to generate artificial intelligence using its own infrastructure and resources – this is especially valuable because it means the nation can preserve and leverage the strengths of its culture, traditions, language and more.

This new area provided Nvidia with zero revenue last year, but this year it is already on track to deliver double-digit billions in revenue. Examples of Nvidia’s activities in this area include projects to build supercomputers together with Japan and Italy, and even a project with a French company to build the largest supercomputer in Europe.

Nvidia talked about the importance of sovereign AI at the beginning of the movement, and it’s clear that this opportunity could generate significant revenue as countries 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 CEO Elon Musk’s comment illustrates the chip designer’s importance in his industry: “Right now, there’s nothing better than Nvidia hardware for artificial intelligence,” Musk said. Apart from that, Oracle co-founder Larry Ellison recently said that he and Musk begged Nvidia for more chips during a meeting with CEO Jensen Huang. Nvidia said demand for its GPUs exceeded supply.

The automotive industry was a big growth driver for Nvidia in the last quarter, as every developer of autonomous driving technology uses Nvidia products. The company predicts the industry will generate “multi-billion” revenues, and those revenues will grow as more computing power is needed in next-generation vehicles.

4. Artificial Intelligence Could Transform Healthcare With Nvidia

Artificial intelligence has the potential to revolutionize many fields, but Nvidia’s Huang predicts the technology will have the biggest impact on healthcare. At the company’s GTC conference earlier this year, Huang emphasized that Nvidia is already present in various specialties – from imaging to gene sequencing and robotics.

At the conference, Huang announced the launch of approximately two dozen new services covering the areas of imaging, speech recognition and drug discovery. In a recent earnings report, Nvidia said healthcare is “on track” to become a multi-billion dollar business for the company.

All these elements show us that Nvidia’s revenue growth still has a long way to go. 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 can be sustained over time. Here are four fantastic, billion-dollar reasons to buy Nvidia stock today.

Adria Cimino holds positions at Oracle and Tesla. The Motley Fool covers and recommends Nvidia, Oracle, and Tesla. The Motley Fool has a disclosure policy.