Nvidia (NASDAQ: NVDA) has been on a stunning rally since the beginning of 2023, driven primarily by the rapid growth of its data center business. The company’s data center business has benefited from the booming demand for its artificial intelligence (AI) graphics cards, leading to record revenues in its recently concluded fiscal year 2024.
In fiscal year 2024, Nvidia’s data center business generated a whopping $47.5 billion in revenue, accounting for 79% of its total revenue. This represented a massive increase of 217% from the previous year. The strong growth continued in the fourth quarter of fiscal 2024, with the data center business recording a year-over-year revenue increase of 409% to $18.4 billion.
The continued momentum in Nvidia’s data center business has led to an optimistic outlook for the current quarter, with the company expecting revenue of $24 billion, a 233% increase from the same period last year. This suggests that Nvidia’s data center business remains a major catalyst for the company’s growth.
However, Nvidia’s second-largest business segment, its gaming business, is also poised for significant growth thanks to AI. Nvidia revolutionized personal computers in 1999 with the introduction of the world’s first GPU, which is now being used in multiple industries, including gaming.
In fiscal year 2024, Nvidia’s gaming segment generated $10.4 billion in revenue, a 15% increase from the previous year. The strong growth in gaming revenue in the fourth quarter of fiscal 2024, coupled with the recovery in the PC market and the adoption of AI-enabled PCs, suggests that Nvidia’s gaming business is gaining momentum.
Nvidia’s latest RTX 40 series GPUs come equipped with generative AI capabilities, offering a significant upgrade for users. The company has already enabled generative AI capabilities for an installed base of 100 million users using the RTX series of graphics cards. The increase in adoption of AI-enabled PCs presents a huge opportunity for Nvidia to tap into the gaming market.
According to IDC, annual shipments of AI-powered PCs could reach 167 million units in 2027, presenting a massive growth opportunity for Nvidia. If the company can maintain its dominance in the AI GPU market and capitalize on the emerging AI PC market, it could see significant revenue growth in the coming years.
Investors looking to capitalize on Nvidia’s growth potential may find the stock attractive at its current valuation of 33 times forward earnings. With a strong position in the data center and gaming markets, as well as the potential for growth in AI-enabled PCs, Nvidia could continue its impressive growth trajectory in the long run.
