Key Takeaways
Nvidia Corp. is leveraging its dominance in artificial intelligence to attack the central processing unit market, projecting it will generate $20 billion in CPU revenue this year in a direct challenge to incumbents Intel Corp. and Advanced Micro Devices Inc.
"The new Vera CPUs have opened a 'brand new $200 billion tab' for the company," Colette Kress, Nvidia's Chief Financial Officer, said on a recent earnings call. She added that every major hyperscale and system maker is partnering with the company to deploy the new chips.
The forecast is centered on the new Vera CPU, a component of Nvidia's next-generation rack-scale system called Vera Rubin. The system, which also includes 72 Rubin GPUs, is designed for the massive AI factories that CEO Jensen Huang says are part of "the largest infrastructure expansion in human history." The company noted that AI pioneer Anthropic PBC has become a key customer for its next-generation systems.
This aggressive push into a new market could unlock a significant new revenue stream for Nvidia, whose market capitalization has surged to over $5.4 trillion on the back of its AI chip sales. The move puts it on a collision course with Intel and AMD, which have long dominated the server CPU space. While Nvidia's stock was largely flat following its earnings, the potential for a new multi-billion-dollar business line presents a major long-term growth driver.
The ambitious CPU forecast comes after Nvidia reported another quarter of powerful growth. First-quarter revenue jumped 85% from a year ago to $81.62 billion, beating analyst estimates. The data center unit, which now accounts for over 90% of the company's sales, saw revenue climb 92% to $75.2 billion, underscoring the immense demand for its AI-training hardware.
Nvidia's core business remains its graphics processing units (GPUs), which excel at the parallel processing required to train large language models. However, the company is now looking to provide the entire suite of data center hardware. The Vera Rubin system follows the currently shipping Grace Blackwell platform, and Nvidia is betting that customers will want to buy integrated systems that include both its market-leading GPUs and its new CPUs.
Despite the blockbuster results and bullish forecast, some investors remain cautious. The company's stock saw a muted reaction, which EMarketer analyst Jacob Bourne attributed to the beat being "already priced in." He noted the "lingering question is whether it can convince investors the AI buildout has durability into 2027 and 2028." To reward shareholders, Nvidia authorized an $80 billion stock buyback and substantially increased its dividend.
This article is for informational purposes only and does not constitute investment advice.
