There's no hotter stock in the world. NVIDIA (NASDAQ: NVDA) At the moment, the company's H100, A100, and new Blackwell semiconductor chips are widely considered superior to the competition, and given Nvidia's impressive lineup of graphics processing units (GPUs), the company is undoubtedly enjoying this moment of widespread generative AI applications.
While this is encouraging, investors might be surprised to learn that Nvidia offers a lot more than just GPU chips and data center services. Let's take a closer look at one of Nvidia's secretive, under-the-radar businesses and evaluate why this particular one may be all the more important.
Beyond Chips and Data Centers
Nvidia reports its revenues in two categories: computing and networking, and graphics. When Nvidia was founded in the early 1990s, the company's original mission was to improve the graphics processing capabilities of video games.
While gaming remains a big part of Nvidia, the company's biggest business is now in computing and networking. Admittedly, computing and networking, and gaming, are pretty general terms. What do they actually mean?
According to Nvidia's filings, the computing and networking division is primarily made up of the company's data center, robotics and artificial intelligence (AI) businesses, while graphics operations account for Nvidia's GPU business.
In the company's fiscal first quarter of 2025 (ended April 30), computing and networking generated revenue of $22.7 billion, up 408% year over year. One of the subtle catalysts in the computing and networking business is Nvidia's Computing Unified Device Architecture (CUDA) platform. CUDA is a program that allows developers to create software applications that run in tandem with Nvidia's GPUs.
On the surface, that may not seem like a big deal, but the CUDA infrastructure is incredibly important to Nvidia. Let's see why.
Why is CUDA important to Nvidia?
Currently, industry analysts estimate that Nvidia holds 80% of the market share for AI-powered chips. One of the main use cases for AI chips relates to training and inference of AI models. Specifically, these applications require them to build large-scale language models (LLMs) such as ChatGPT, Anthropic, Claude, and Gemini.
What makes CUDA so advantageous for Nvidia is that the company offers complementary services that can be layered on top of its flagship GPU hardware products. This is a major differentiator for Nvidia as it allows the company to sell both hardware and software services related to AI development.
Additionally, CUDA gives Nvidia flexibility beyond semiconductors as competition in the chip space continues to heat up, and considering that software tends to bring in much higher margins than hardware, I'm optimistic that the company's gross margins and cash flow profile won't take a big hit (if at all) even if it starts to lose market share in the chip space.
Should you buy Nvidia stock now?
Nvidia's stock price has risen 156% since the start of 2024. This is because S&P 500 and Nasdaq Composite IndexBut this week, Nvidia briefly became the world's largest company by market capitalization.
NVDA price-to-earnings data from YCharts
This might suggest that Nvidia's stock price has skyrocketed, but the chart above might suggest otherwise: the company is currently trading at about 74 times earnings, which is actually significantly lower than it was just a year ago.
This trend suggests that Nvidia's profits are growing at a faster pace even as its stock price soars. Technically, this means that on a P/E basis, Nvidia's stock is cheaper than it was last year.
I view Nvidia as a long-term option in the AI industry. With the company's commanding lead in chips and its CUDA software business, I think Nvidia has a bright future for many years to come as AI development continues to grow.
While Nvidia stock is currently experiencing some momentum, long-term investors may still need to consider adding to existing positions or starting to build new ones.
Should I invest $1,000 in Nvidia right now?
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Adam Spatacco has investments in Microsoft and Nvidia. The Motley Fool has investments in and recommends Microsoft and Nvidia. The Motley Fool recommends buying Microsoft January 2026 $395 calls and selling Microsoft January 2026 $405 calls. The Motley Fool has a disclosure policy.
Surprise! NVIDIA Has a Secret Business Beyond Chips That's Already Making Billions in Revenue This post originally appeared on The Motley Fool
