Nvidia (NVDA 0.48%) has been one of the hottest stocks on the market in the past three years, thanks mainly to its graphics processing units (GPUs) that are being deployed in huge numbers in data centers to power artificial intelligence (AI).
Its data center GPUs have helped it become the world's largest company, and they are likely to remain a key growth driver. Investors, however, should note that its GPUs were originally designed for powering graphics-intensive tasks, such as gaming, in personal computers (PCs) and laptops.
The chipmaker now gets a very small portion of its total revenue from sales of PC graphics cards. But this business still has the potential to move the needle for Nvidia in a significant way over the next five years. Let's look at why.
Image source: Getty Images
AI is supercharging Nvidia's PC business
The demand for generative AI PCs is growing rapidly. The researcher Gartner estimates that $51 billion worth of AI PCs were sold last year. That number is expected to jump to $90 billion in 2025, followed by another strong jump to $144 billion next year. The reason AI PCs are witnessing such healthy demand is because of their ability to run AI tasks locally, thereby helping users improve productivity.
NASDAQ: NVDA
Key Data Points
This on-device AI processing requires dedicated hardware such as neural processing units (NPUs) and GPUs. And Nvidia has set its sights on the lucrative opportunity present in this market. Its RTX class of PC GPUs not only helps users run on-device AI applications privately, but it can also accelerate the performance of apps, games, and reduce video editing times.
The company says that PCs equipped with its GPUs can quickly generate AI images and render 3D designs for creators. In all, it claims that its RTX GPUs can accelerate the performance of more than 700 games and applications, including popular AI models that can help users convert audio to text and search through data such as images, tables, and text with simple prompts.
The company is witnessing healthy growth in its gaming and AI PC business. Its revenue from this segment jumped 49% year over year in the second quarter of fiscal 2026 (which ended on July 27) to $4.3 billion.
The segment has reported a 47% jump in revenue in the first half of the fiscal year to $8.1 billion. For comparison, Nvidia's gaming and AI PC revenue increased by just 9% in the previous fiscal year to $11.4 billion.
So the chipmaker is on track to significantly increase its PC and gaming revenue in the current fiscal year. At the current run rate, it could end fiscal 2026 with more than $16 billion in gaming and AI PC revenue. This business could become much bigger after five years since Nvidia is the dominant player in the PC GPU market.
Jon Peddie Research says that Nvidia controlled a 94% of the discrete GPU market in the second quarter this year, leaving rival Advanced Micro Devices in the dust. Market research company Technavio estimates that the gaming GPU market could add nearly $60 billion in incremental revenue over the next five years, reaching an annual growth rate of more than 21%, and Nvidia could corner a lion's share of that revenue opportunity.
The company's dominance of the discrete GPU market should allow it to grow faster than this space over the next five years. Assuming its gaming and AI PC revenue increases at a compound annual growth rate of 25%, the annual revenue from this segment could hit nearly $50 billion in five years (using the projected revenue of $16 billion in the current fiscal year as the base).
This is another great reason to buy the stock
Annual revenue of $50 billion from the gaming business would have sounded like a big deal for Nvidia a few years ago before the AI catalyst kicked in. For some perspective, its annual revenue in fiscal 2023 was $27 billion. This year, it is expected to generate more than $206 billion in sales, with close to 90% of that expected to come from the data center segment (based on the revenue share seen in the first half of the fiscal year).
The huge opportunity in AI data center chips suggests that the revenue from this segment could triple over the next five years, making Nvidia a much bigger company than it is now. The potential contribution from the gaming and PC segment should complement the terrific jump in data center revenue, potentially paving the way for the company to hit a $10 trillion valuation in five years.
This AI stock still has the potential to multiply investors' wealth even after the outstanding gains in the past five years, so it makes sense to buy Nvidia before it soars higher.
