Nvidia: Navigating New Opportunities Amidst AI Hype

Long-term investing is essential for achieving stable returns in the stock market. This strategy reduces the impact of short-term fluctuations and highlights a company’s true value. Nvidia(NASDAQ: NVDA) leads the charge in generative artificial intelligence (AI) advancements. However, as excitement decreases and new technologies such as robotics and self-driving vehicles emerge, the future path for Nvidia remains uncertain.

Nvidia’s Reinvention Journey

Currently, approximately 88% of Nvidia’s revenue, totaling $30.8 billion, comes from its data center segment. This heavy reliance on generative AI hardware makes the company vulnerable, particularly as clients face financial challenges with their AI initiatives. Compounding this issue, low-cost competitors, such as China’s DeepSeek, have led shareholders to question the long-term profitability of the AI sector.

Moreover, the rise of custom chips enables major AI customers like OpenAI to bypass Nvidia by working closely with manufacturers like Taiwan Semiconductor Manufacturing to craft their own solutions.

It’s important to note that Nvidia’s focus on generative AI is a more recent development. The company has a history of adapting to new trends. As recently as fiscal 2022, its gaming segment—dominated by video game and crypto mining hardware—accounted for about 46% of its revenues ($12.46 billion). Today, that figure has dropped to just 9.4%, as AI growth has taken precedence over these formerly key areas.

This swift transformation underscores the flexibility of Nvidia’s core technology: the graphics processing unit (GPU). This type of chip excels in performing many calculations simultaneously. Investors can expect that over the next ten years, GPUs will continue to find innovative applications, even if the generative AI market cools. Sectors like robotics and autonomous vehicles present bright opportunities.

Future Prospects in Self-Driving Cars and Robotics

Analysts from McKinsey & Company predict that autonomous driving could generate between $300 billion to $400 billion in revenue by 2035, as car manufacturers leverage this technology for software as a service (SaaS) models. Similar to generative AI, self-driving vehicles require rapid and precise data processing, which makes this field a future revenue stream for Nvidia and its superior GPUs.

Tesla exemplifies the magnitude of this potential. Despite lacking a prominent generative AI language model, Tesla is a significant Nvidia client, acquiring thousands of GPUs to create its Dojo supercomputer—aiming to enhance its full self-driving platform.

Nvidia has staked its claim in the automotive space with software such as Drive AGX, which is designed to integrate seamlessly with its hardware to facilitate self-driving capabilities and analyze driving data.

Image source: Getty Images.

By the third quarter, Nvidia’s automotive and robotics segment reported sales of $449 million. Although this is modest compared to total revenue of $35 billion, the segment saw remarkable growth of 72% year over year. This upward trend is anticipated to continue through the coming decade.

Assessing Nvidia Stock: Is it a Good Buy?

While the excitement surrounding generative AI might start to diminish, demand for Nvidia’s GPUs may lessen as companies pursue more affordable options. Nonetheless, long-term prospects in robotics and self-driving technology could compensate for any decline in AI demand.

Investors might approach purchasing Nvidia stock with caution, especially during the current hype. It may be wise to gather more information before making any investment decisions.

Should You Invest $1,000 in Nvidia Now?

Before investing in Nvidia, consider this:

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Reflect on this: If you had invested $1,000 in Nvidia when it made the Stock Advisor‘s list on April 15, 2005, you would now have $850,946!!*

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*Stock Advisor returns as of February 7, 2025

Will Ebiefung has no position in any stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool’s disclosure policy is publicly available.

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