NVDA

What Exactly Does Nvidia Do?

While Nvidia (NASDAQ: NVDA) stock has soared in popularity as a way to gain artificial intelligence (AI) exposure, many investors aren't sure what the company does. Maybe they've heard of graphic processing units (GPUs), maybe they've heard of data centers, or maybe they've heard of AI. The exact nature of Nvidia's business, though, may remain shrouded in mystery.

One of the best ways to ensure investing success is to have a thorough understanding of what companies do before an investor clicks the buy button. Since Nvidia's business is more than just AI, it's worth taking a closer look at what it exactly does.

Nvidia in a nutshell

The company organizes its business in two segments: there's compute and networking, and there's graphics. Accounting for the lion's share of Nvidia's business -- 78% of revenue and more than 97% of operating income for fiscal 2024 -- the compute and networking segment is where Nvidia's AI exposure is located. The company's accelerated computing platforms, for example, help data centers manage the extraordinary computing demands of AI. According to the company, its data center solutions "can scale to tens of thousands of GPU-accelerated servers interconnected to function as a single giant computer."

Rounding out the company's business, the graphics segment includes the GPUs provided for varying markets, including gaming, professional visualizations (workstations), and automotive. For fiscal 2024, these three markets represented 17%, 3%, and 2% of revenue, respectively. While not as robust as the company's data center business, the gaming and automotive markets have represented some aspects of AI. Nvidia's GPUs, for example, are used in various types of autonomous vehicles.

Nvidia is a so-called fabless chip designer, relying on third-party foundries to manufacture and package physical products based on its semiconductor designs.

What's a better-informed investor to do now?

By designing industry-leading GPUs, Nvidia is at the forefront of the AI explosion. Its platforms are indispensable for data centers attempting to manage the tremendous computing demands associated with large language models and other sorts of generative AI.

Simply put, Nvidia is a leader in sophisticated accelerated computing. And for applications such as machine learning and AI, in general, accelerated computing is essential.

Should you invest $1,000 in Nvidia right now?

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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