Most consumers recognize the Nvidia (NVDA 5.64%) brand as a big name in video gaming computers. Most investors, on the other hand, know the company also has a hand in autonomous driving technologies, professional visualization, and even data centers. (As it turns out, the same tech that makes graphics cards work is also well suited for artificial intelligence applications.)
What few people may fully appreciate, however, is how much or how little revenue is being generated for Nvidia by these different markets. Here's a visualization of the data that just might surprise you.
Source: Getty Images.
Not just video gaming
Just to be clear, the video gaming market is still just as important to the company as it ever was -- just as the company is still important to video gamers. Of last quarter's fairly typical mix of revenue, 45% of Nvidia's top line of $7.1 billion can be attributed to its video gaming hardware. And, as to the latter, data gathered by John Peddie Research indicates that during the second quarter of this year, more than 68% of graphics processing units shipped worldwide were Nvidia-branded, extending its long-standing streak of dominance. Beyond that, though, investors' understanding of the company's revenue mix can get a bit murky.
The graphic below clears this picture up.
Largely founded on the 2018 launch of its Tesla T4 graphics processor for data centers followed by the debut of its EGX edge computing platform in early 2019, the data center segment has become big business for Nvidia. Last year's finalization of the acquisition of Mellanox has only hastened this growth; Mellanox's high-performance networking technology was a brilliant fit with Nvidia's existing know-how. End result? As of last quarter, data centers make up another 41% of the company's top line.
Data source: Nvidia. Chart by author. All dollar figures are in millions.
At its current growth trajectory, it's not a stretch to suggest Nvidia's data center arm will soon permanently eclipse its video gaming graphics card business. The industry's undertow certainly supports this idea, too. Technology market research outfit Technavio estimates that the data center market will expand at an annual clip of 21% through 2025.
And, artificial intelligence outlays -- where Nvidia excels -- will lead that growth. IDC forecasts worldwide spending on artificial intelligence will swell from $85.3 billion this year to more than $200 billion by 2025, translating into a compound annual growth rate of more than 24%.
Implications
None of this is to suggest the company's budding autonomous automobile business is something to dismiss, or that its solutions for computer-based designers or animators are something to ignore. There are growth opportunities on those fronts, too, and they don't require a major overhauling of the company's existing tech.
It is to point out, however, that things are changing rapidly in a big way. Video gaming is a good market for Nvidia, but not necessarily a major growth driver. Data centers are a great market for Nvidia, and getting better by the day.
Bottom line? Investors have plenty to keep an eye on with this company, but above all else, they should be tuned into Nvidia's data center and artificial intelligence opportunities. They'll soon account for the biggest piece of the company's top and bottom lines, even demoting video gaming as Nvidia's centerpiece.
