When chipmaker Nvidia (NVDA) reports earnings on August 27, investors will focus mostly on its data center business, where the company makes money selling its powerful AI chips. But this segment includes more than just chip sales. In fact, it also covers Nvidia’s crucial networking technologies, which often don’t get enough attention, according to Yahoo Finance. These tools, like NVLink, InfiniBand, and Ethernet, are what allow Nvidia’s chips to communicate with each other and keep massive data centers running efficiently.
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Interestingly, Nvidia made $12.9 billion from networking last year, which was more than its entire gaming business. Furthermore, networking made up $4.9 billion of Nvidia’s $39.1 billion in data center revenue in Q1. Experts say that this part of the business is growing fast as more companies build out AI infrastructure. As a result, Nvidia’s networking is becoming more important as AI systems become larger and need faster communication between chips to work effectively.
This is especially true as inferencing (the process of running AI models) becomes more demanding. At first, people thought running models wouldn’t need as much power as training them, but that’s changing. Strong networking is now seen as key to good AI performance, just like fast chips. And while competitors like AMD (AMD), along with big cloud companies, are working on their own chips and networking tools, Nvidia is still ahead and likely to keep growing.
What Is a Good Price for NVDA?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 35 Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $186.14 per share implies 3.8% upside potential.
