Jensen Huang Points To 'A Powerful New Wave Of Growth' For Nvidia And Wall Street May Be Overlooking It: Chipmaker Set To Dominate The AI Datastack?

Nvidia Corp.’s NVDA strong first-quarter performance highlights a quiet, yet fast-growing segment of the company that has long been overlooked by investors.

What Happened: During its much-anticipated first quarter results on Wednesday, NVIDIA reported $5 billion in sales from its networking business, an increase of 64% from the prior quarter, with the company’s CFO Colette Kress noting during the earnings call, that its enhanced Ethernet platform, SpectrumX, is now annualizing over $8 billion.

“Spectrum X posted strong sequential and year-on-year growth,” she said, adding that adoption is “widespread across major CSPs,” including Microsoft Azure, Oracle Cloud, CoreWeave Inc. CRWV, and most recently, Google Cloud and Meta Platforms Inc. META.

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During the call, CEO Jensen Huang emphasized the company’s strategy to dominate, not just the AI compute layer, but the entire datacenter architecture.

He says, “we now have four networking platforms,” referring to NVLink, SpectrumX, InfiniBand, and BlueField, all of which he says are “doing really well.”

Powerful AI models such as ChatGPT or Google’s Gemini require hundreds of thousands of GPUs that need to constantly talk with one another. These conversations are an intense, split-second exchange of huge volumes of data that traditional Ethernet switches are incapable of handling.

The company's NVLink Gen 5 platform delivers 130 terabytes per second of bandwidth in a single rack, which is equivalent to the world's peak internet traffic.

Huang says that enhanced Ethernet, once considered unsuitable for AI, now rivals InfiniBand in efficiency. “The traffic of AI is insanely bursty… and so SpectrumX has been really, quite frankly, a home run.”

Despite its rapid growth, networking still makes up a relatively small portion of NVIDIA's $39.1 billion data center revenue, where GPU sales dominate. This is potentially obscuring its growth and impact among investors and analysts.

“This is the start of a powerful new wave of growth,” Huang said, reinforcing his confidence in the segment. “We're off to the races.”

Why It Matters: Nvidia’s networking play is already mounting pressure on legacy giants in this space, such as Arista Networks Inc. ANET and Cisco Systems Inc. CSCO.

During its first quarter results on Wednesday, the company reported $44.1 billion in revenue, up 69% year-over-year, and beating consensus estimates at $42.3 billion. It, however, missed earnings estimates, with a profit of $0.81 per share, against $0.88 per share.

Price Action: Shares of Nvidia were down 0.51% on Wednesday, trading at $134.81, but are up 4.89% after hours, following the company’s better-than-expected first quarter performance.

According to Benzinga’s Edge Stock Rankings, Nvidia scores well across most metrics and has a favorable price trend in the short, medium, and long term. Click here for more insights.

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