Nvidia‘s (NASDAQ: NVDA) revenue has been soaring quarter after quarter due to its expertise in powering artificial intelligence (AI) projects. The company’s graphics processing units (GPUs) are the fastest around, driving one among the many vital thing elements of AI: the deep learning of AI models, which serves as a start line for his or her incredible performance down the road.
All of this has helped Nvidia’s data center revenue reach record levels, climbing greater than 400% to $18.4 billion in essentially essentially the most recent quarter. But this data center business doesn’t stop at just a set of leading AI chips. The company offers customers a full array of services and products through the information center unit to help them advance their AI platforms. And one amongst these offerings is software and services, a business that just reached a $1 billion annualized revenue run rate throughout the quarter.
In actual fact, CEO Jensen Huang said in the midst of the earnings call that software should grow to be “a very significant business over time.” All of this implies software is probably Nvidia’s latest AI growth driver, further expanding the company’s opportunities to dominate on this hot technology. Could this high-flying stock proceed to soar? Let’s discover.
Nvidia’s software opportunity
So what’s that this software opportunity all about? Well, let’s consider what firms could do with AI on their very own after which see what Nvidia offers. To construct an AI software platform, a company could gather various open-source software elements to include in its existing infrastructure.
But counting on a limiteless number of open-source packages makes it hard to maintain up security and stability — and other people aren’t minor issues. Failure in these two areas may result in failure of a whole AI project. And many firms haven’t got the engineering resources crucial to keep up their software stack running each on site and thru every cloud service provider worldwide.
That’s where Nvidia is offered in with its Nvidia AI Enterprise, a kind of operating system for AI. Through enterprise, Nvidia manages a customer’s software stack, doing every thing from optimizing to updating and more.
And the pre-trained models and tools available through the software system help customers gain when it comes to efficiency, subsequently reducing costs over time. For instance, the Nvidia Rapids accelerator, which uses GPUs, when paired with the Apache Spark data processing system makes the job five times faster and cuts operational costs by five — that’s as compared with systems counting on central processing units (CPUs).
“My guess is that every enterprise on the earth, every software enterprise company that are deploying software in the entire clouds and private clouds and on-prem will run on Nvidia AI Enterprise,” Huang said in the midst of the earnings report.
GPUs are the vital thing
All this implies software could indeed be the following growth driver for Nvidia. Yes, the company’s top GPUs are the vital thing product behind all of its other offerings. But by expanding into robust and varied services and products harnessing the power of those high-performing chips, Nvidia is extending its growth opportunity. And software, consequently of its essential role in AI, could offer Nvidia its next big AI growth driver.
Does this mean Nvidia may proceed to soar even after climbing greater than 270% over the past yr? It definitely suggests Nvidia has what it takes to proceed to advance over the long term — even when it marks a pause here and there.
That’s because Nvidia’s software ambitions confirm the company isn’t just regarding the GPU. Yes, the tech giant must stay ahead of rivals when it comes to chip performance — and its increases in research and development (R&D) spending indicate that could be a priority. Last yr, Nvidia’s R&D spending rose 18% as compared with the previous yr.
Nvidia’s software strategy, and the indisputable proven fact that its software platform is obtainable through the entire leading cloud providers, show us yet another area which may drive spectacular growth moving forward. And that must drive further share price gains over time.
All of this means Nvidia today, trading at 32x forward earnings estimates, looks pretty low-cost for a company with loads long-term potential. And that makes this growth stock that’s already soared still a beautiful buy today.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot has a disclosure policy.
This May Be Nvidia’s Latest Artificial Intelligence (AI) Growth Driver. Could the Stock Proceed to Soar? was originally published by The Motley Idiot