Nvidia (NASDAQ: NVDA) is currently one of the hottest stocks in the market, thanks to its superior H100, A100, and Blackwell semiconductor chips. While the company is well-known for its graphics processing units (GPU), there is a lesser-known aspect of Nvidia’s business that may be just as important.
When Nvidia first started in the 1990s, its main focus was on improving graphics processing for video games. However, the company has since expanded into other areas, with its largest businesses falling under compute and networking and graphics categories. The compute and networking segment includes data center, robotics, and artificial intelligence (AI) activities, while graphics encompasses the GPU business.
During the first quarter of fiscal 2025, the compute and networking segment generated a whopping $22.7 billion in revenue, showing a significant increase year over year. A key catalyst in this segment is Nvidia’s compute unified device architecture (CUDA) platform, which allows developers to write software applications that work in parallel with Nvidia’s GPUs.
The importance of CUDA for Nvidia cannot be overstated. Currently, the company holds an estimated 80% market share in AI-powered chips, with CUDA playing a crucial role in AI model training and inferencing. This gives Nvidia a competitive edge by offering both hardware and software services related to AI development, which can be a major revenue driver for the company.
As competition in the chip space continues to grow, CUDA provides Nvidia with flexibility beyond semiconductors, and the higher margins associated with software services can help offset any potential losses in market share. This makes Nvidia a solid long-term investment option for investors looking to capitalize on the growing AI landscape.
Despite Nvidia’s stock price surging 156% in 2024, the company’s current price-to-earnings (P/E) multiple is actually lower than it was a year ago, indicating that the stock may still have room to grow. With its strong position in the chip space and CUDA software business, Nvidia is poised for continued success in the AI development sector.
In conclusion, Nvidia’s lesser-known CUDA software business is a key driver of revenue and profitability for the company. As AI applications continue to gain traction, Nvidia’s expertise in both hardware and software services positions it as a top player in the industry. For investors looking to capitalize on the AI boom, Nvidia remains a solid investment option with significant growth potential.
This article was originally published by The Motley Fool but has been adapted to provide unique insights on Nvidia’s hidden revenue source by Extreme Investor Network.