Graphics chipmaker Nvidia (NVDA +2.06%) is the dominant company in its core markets -- and by a wide margin. But with a $557 billion market cap, does Nvidia have enough growth potential to join the trillion-dollar club? In this Fool Live video clip, recorded on Oct. 11, Fool contributor Danny Vena gives his take on Nvidia's future.
Danny Vena: Everyone knows that Nvidia has the top-tier chips used by gamers. There's not any question about that. If you look at the numbers, according to, I think it's John Poulton research says that Nvidia has more than 80%. I think the most recent numbers came out at 83% of the discrete desktop GPU market. That is a cash cow business for them. It continues to generate growing revenue, growing profits. It also, because of the heavy cash flow that they get from that, they are able to spend a ton of money on research and development. Now, several years ago, Jensen Huang, who is the company's CEO, realized that there was a big push in artificial intelligence and a big push into data centers and he saw how packaging these GPUs, or graphics processing units.
Just to backup for just a second here, a graphics processing unit essentially is a chip that can do a multitude of mathematical calculations simultaneously and do them at lightning speed. That made it perfect for building AI and machine learning models. He was able to package software and hardware together that researchers began to use for AI. Even up until now, several years later, there is no better mouse trap. Nobody has come up with anything that they have been able to sell to everyone that does a better job, a faster job, and a more efficient job at AI and moving things around data centers than the graphics processing unit.
Now I wanted to share my screen for just a minute here because I want to share with you a recent slide from Nvidia's investor presentation. There's actually two here. First, this just gives you the highlights of the most recent quarter. They had record total revenue, record gaming revenue, record data center revenue, and record professional visualization revenue, which is essentially their three biggest revenue segments. All in all revenue was up 68% year over year to $6.5 billion. Gaming revenue was up 85% year over year to a record $3.06 billion. Obviously their gaming business is not slowing down at all.
They're also generating record revenue in hyperscale computing and in data centers. If you think about the big overarching trend that's going on right now, the big digital transformation that's happening, a lot of companies are moving a lot of data to the data centers. If you look at how that has impacted the company's revenue, I mean, $6 billion in the second quarter. We're talking about a run rate of like $26 billion. Their gross margins are attractive. Look at what their net income grew, 282% year over year, diluted earnings per share of 276%. Cash flow from operations up 71%. Nearly half of their revenue drops down to the bottom line and into cash flow from operations.
This is a really attractive proposition. I don't see gaming slowing down significantly, particularly as they continue to steal market share. I think data centers and AI are only just beginning to get started in the digital transformation. I see this as a company that is right at the intersection of two of the biggest trends that we have going on now. This is why I am still very sold on Nvidia and why I believe this stock is still a buy even though the stock has basically gone up fourfold over the past little more than two years since late 2019. That's huge gains. I don't think it's done yet and this is on my list of stocks that I believe will have a $1 trillion market cap in the coming years.
