Nvidia (NVDA 6.18%) used to make most of its revenue by serving the gaming industry, and companies in China and Taiwan have been major customers over the years. But recent times have been transformational for the chip designer as a wider range of industries started realizing the potential of Nvidia's graphics processing units (GPUs) -- and their critical role in powering artificial intelligence (AI) models has sent Nvidia's revenue and share price soaring.
Today, a country that used to make up a small portion of Nvidia's revenue has become the company's biggest customer. What does this mean for Nvidia's stock? Let's find out.
Image source: Getty Images.
The Statista chart below shows that U.S. companies, among the smallest Nvidia customers just four years ago, now make up the biggest share of the company's revenue. The U.S. accounted for more than $26 billion in revenue in the latest fiscal year, while Taiwan and China delivered $13 billion and $10 billion, respectively. Sales to these countries have climbed from previous years' levels -- but not enough to surpass the enormous demand coming from the U.S.
Data source: Statista.
Growth in the AI business
Nvidia said during its recent earnings report that this trend is thanks to compute and networking, referring to the broad range of products Nvidia offers to clients in the field of AI. So, this growth in the AI business has translated into more U.S.-based revenue. And this looks like good news for Nvidia, considering the U.S. ban on the export of high-performance chips to China. In the most recent quarter, the ban hurt Nvidia's sales to companies there.
Of course, Nvidia aims to rekindle sales growth in China by introducing chips not impacted by the ban, but it's still unclear whether these products will catch on.
So, what does this mean for investors? The growth in U.S. revenue, driven by AI demand, offers us visibility on future earnings prospects -- and the picture looks bright. That makes Nvidia a top AI stock to buy now.
