Nvidia’s Tremendous Growth Driven by AI Dominance

Nvidia (NASDAQ: NVDA) has emerged as a leading stock in recent years, boasting a striking increase of 610% since the beginning of 2023 (as of April 16). This remarkable performance is largely due to a single factor: artificial intelligence (AI).

AI has gained significant momentum globally, positioning Nvidia as a key player in its development. This is primarily because Nvidia’s graphic processing units (GPUs) are essential for training AI models. Therefore, investors should closely monitor the company’s data center revenue, which is closely linked to its leadership in AI and future growth prospects.

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NVDA Revenue (Quarterly) data by YCharts

Nvidia’s data center revenue, which includes GPUs and other hardware, has become its largest business segment. In the fourth quarter of its fiscal year 2025, this segment grew by 93% year over year, reaching $35.6 billion and accounting for over 90% of the company’s total revenue.

While investors should not anticipate data revenue to continue growing at rates above 90% each quarter, any sudden declines in growth could indicate a weakening demand for AI infrastructure or a loss of market share to competitors like Advanced Micro Devices. Given Nvidia’s strong market position, it is more likely that the former scenario is true.

Nvidia’s valuation largely rests on high expectations for AI-driven growth and sustained dominance in the data center sector. Any signs of a significant decline in demand may lead investors to reconsider their positions, resulting in increased stock volatility.

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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.