Nvidia and Amazon Web Services, Amazon's highly profitable cloud division, have something surprising in common. First of all, their core business was born out of a happy accident. In the case of AWS, we realized that we could sell internal services (storage, compute, memory) that we created for our company. For Nvidia, the fact is that GPUs created for gaming purposes are also suitable for handling AI workloads.
That ultimately led to explosive revenue growth in recent quarters. Nvidia's revenue is growing in triple digits, from $7.1 billion in the first quarter of 2024 to $22.1 billion in the fourth quarter of 2024. Most of that growth has come from the company's data center business, which is a pretty impressive trajectory.
Although Amazon has never experienced such intense growth spurts, it has consistently been a major revenue driver for the e-commerce giant, and both companies have experienced market dominance for the first time. However, over the years, Microsoft and Google have entered the market to form the Big 3 cloud vendors, and other chip makers will eventually start gaining significant market share as the revenue pie continues to expand. It is expected that A few years.
Both companies were clearly in the right place at the right time. Around 2010, he said, as web apps and mobile began to emerge, the cloud provided on-demand resources. Businesses quickly began to realize the value of moving workloads and building applications in the cloud rather than operating their own data centers. Similarly, the proliferation of AI over the past decade, and more recently the proliferation of large-scale language models, has led to an explosion in the use of GPUs to process these workloads.
Over the years, AWS has grown into a highly profitable business, currently generating nearly $100 billion in revenue, and will be a highly successful company even if it separates from Amazon. But while Nvidia is growing, AWS's growth is starting to slow. This is partly the law of large numbers, which will eventually affect his Nvidia as well.
The question is whether Nvidia can sustain its growth and become a long-term revenue powerhouse, like AWS has become for Amazon. If the GPU market starts to tighten, Nvidia has other businesses, but as this chart shows, these are much smaller revenue streams and will grow much faster than its current GPU data center business. it's slow.
Image credit: Nvidia
Short-term financial outlook
As the chart above shows, Nvida's revenue growth in recent quarters has been astronomical. And that's likely to continue, according to both NVIDIA and Wall Street analysts.
In its recent earnings report covering the fourth quarter of fiscal 2024 (three months ending January 31, 2024), NVIDIA advised investors that this quarter (first quarter of 2025) He said he expects to generate revenue of $1 billion. Compared to the year-ago first quarter, Nvidia expects growth of approximately 234%.
This is not a number commonly seen in mature public companies. However, given the company's strong revenue growth in recent quarters, the growth rate is expected to decline. From 22% revenue growth from the third quarter to the fourth quarter of the recently ended fiscal year, Nvidia expects a more modest 8.6% growth rate from the last quarter of fiscal 2024 to the first quarter of fiscal 2025. We are expecting. His Nvidia growth rate this quarter is still astounding, not just a three-month look back, but a year-over-year comparison. But other growth slowdowns are also on the horizon.
For example, analysts expect Nvidia to generate the equivalent of $110.5 billion in revenue this fiscal year, an increase of just over 81% from last year's results. This is dramatically lower than the 126% increase recorded in the recently ended fiscal year 2024.
We ask this: So what? Nvidia is expected to continue growing revenue past his $100 billion annual run rate mark for at least the next few quarters. This is impressive for a company whose total revenue was just $7.19 billion in the year-ago period.
That means analysts, and to a more modest extent NVIDIA, expect the company to see strong growth going forward, even if some of its impressive revenue growth slows this calendar year. . It is unclear what will happen in the longer term.
Future momentum
It looks like AI could be the gift that keeps on giving Nvidia for years to come, even as competition from AMD, Intel, and other chipmakers begins to heat up. Like AWS, Nvidia will eventually face stiffer competition, but it currently controls a large portion of the market and can afford to give up some.
Looking purely at the chip level, rather than boards or other adjacencies, IDC shows that Nvidia is in tight control.
Image credit: IDC
At the board level, based on market share numbers from Jon Peddie Research (JPR), a company that tracks the GPU market, Nvidia remains dominant, but AMD is getting stronger.
Image credit: Jon Peddie Research
JPR analyst C. Robert Dow said some of these fluctuations are related to the timing of new product launches. “AMD picks up percentage points here and there depending on market cycles (when new cards come out) and inventory levels, but Nvidia has been in a dominant position for years and will continue to do so. It will continue,” Dow told TechCrunch.
Shane Lau, an IDC analyst who closely follows the silicon market, also expects its dominance to continue, even if trends change. “There are trends and countertrends, and the market that NVIDIA participates in is big and getting bigger, and will continue to grow for at least another five years,” Lau said.
One reason for that is that Nvidia sells more than the chips themselves. “They sell boards, systems, software, services, and time on their supercomputers. So all of these markets are big and growing, and Nvidia loves them all.” He said.
But not everyone sees Nvidia as an unstoppable force. David Linthicum, a longtime cloud consultant and author, says GPUs aren't always necessary, and businesses are starting to realize that. “They say they need GPUs. I look at it and do some back-of-the-envelope calculations, but they don't need them. CPUs are totally fine,” he said .
If this happens, he believes NVIDIA will start to slow down and competition will weaken its hold on the market. “I think over the next few years you're going to see Nvidia morph into a weaker player. There are so many replacements being created out there that we're going to see that. ”
Lau said other vendors will also benefit as companies expand their AI use cases with Nvidia products. “Going forward, I think we'll see market growth that will be a tailwind for Nvidia. But we'll also see other companies riding on that tailwind and particularly benefiting from AI.”
There may also be some disruptive forces at play, which would be a positive outcome to prevent one company from becoming too dominant. “You almost want disruption to happen because that’s how markets and capitalism work best, right? Someone gets an early lead, other suppliers follow, and the market grows. There are players, but they end up being disrupted by better ways to do the same thing within their own market or within adjacent markets that come into their market.” Lau said.
In fact, something similar is starting to happen with Amazon as Microsoft grows in power through its relationship with OpenAI and Amazon is forced to play catch-up on AI. Whatever happens to Nvidia in the long run, for now he's confident that Nvidia is firmly in the driver's seat, making money with his fist, dominating a growing market, and having just about everything going his way. is. However, that does not mean that this will always be the case, nor does it mean that there will not be more competitive pressures in the future.