Important points
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Nvidia’s physical AI revenue grew impressively last quarter.
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The company has significant growth opportunities in this space, as shipments of physical AI devices are set to increase at an impressive rate over the next decade.
Nvidia(NASDAQ:NVDA) is the biggest beneficiary of massive investments in artificial intelligence (AI) data center infrastructure over the past few years. The company’s chip systems are widely deployed by hyperscalers, governments, and AI companies to support the training and deployment of AI models.
But now, AI is moving from the data center to edge applications such as smartphones, drones, vehicles, robots, industrial automation, and healthcare. Edge AI devices can process AI workloads locally rather than sending them to the cloud, enabling faster real-time decision making. The good news for Nvidia stock investors is that the company is already raising money from growth in edge AI applications.
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Image source: Nvidia.
Nvidia’s physical AI business is growing at an impressive pace
Physical AI refers to the integration of AI into edge devices, such as cars and robots, to enable them to make autonomous decisions in real time. Robotaxis, factory robot arms, and humanoid robots are examples of physical AI.
Market research firm Counterpoint Research estimates that shipments of physical AI devices could reach 145 million units between 2025 and 2035. The research firm adds that robots, self-driving cars, and drones will drive the growth of this market. Nvidia has already begun to take advantage of this opportunity.
In its latest earnings report, the company noted that physical AI revenue exceeded $9 billion in the past 12 months. For comparison, Nvidia’s physical AI revenue was $6 billion in fiscal year 2026. That means quarterly revenue run rate for Nvidia’s physical AI business increased by 50%. Importantly, this segment is poised to grow at a stronger pace. That’s because the company has partnered with major physical AI companies. In a recent earnings call, CFO Colette Kress pointed out that:
Our partnership with Uber will enable robotaxis to operate in approximately 30 cities on four continents by 2028. Additionally, in the field of robotics, leading companies across a wide range of industrial, surgical, and humanoid applications are building on Nvidia technology and deploying it at scale.
CEO Jensen Huang also recently said $5 trillion will be spent building factories around the world. Major manufacturers etc. TSMCPegatron, Wistron, Foxconn, and others are already using Nvidia’s platform to build digital twins of their factories before starting actual construction, and importantly, integrating physical AI solutions to boost production.
Nvidia is also collaborating general motors Help automakers build factories equipped with robots. The semiconductor expert also released foundational models and physical AI tools to help developers train robots and self-driving cars.
Grand View Research predicts that the physical AI market could generate $960 billion in annual revenue in 2033, up from just $81 billion last year. Therefore, Nvidia is making the right moves to become a major player in the rapidly growing physical AI market in the long term.
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Nvidia’s focus on expanding its addressable opportunities by entering new markets should help it maintain its impressive growth. Physical AI isn’t the only new area Nvidia is targeting. The decision to sell Vera server central processing units (CPUs) as standalone products will help the company generate an additional $20 billion in revenue this year.
Nvidia has traditionally offered server CPUs as part of rack-scale server solutions that include other chips. But the company can’t ignore the standalone demand for these chips, and management believes the decision to sell Vera CPUs to customers opens up a potentially $200 billion addressable market.
It’s no surprise that analysts have significantly raised their growth forecasts.
Data by YCharts
Nvidia reported earnings per share of $4.77 for fiscal 2026 (ending in January of this year). The consensus estimate for fiscal 2029 earnings per share of $15.64 suggests that NVIDIA’s revenue will grow at a compound annual growth rate (CAGR) of 48%. At a price-to-earnings ratio of 33 times, it discounts the 35.6 times earnings multiple of the tech-heavy Nasdaq 100 index, making this AI stock a good buy now.
The company expects AI infrastructure investments to reach an annual run rate of $3 trillion to $4 trillion by the end of the decade. This means the company’s core data center business is poised to continue to grow steadily. Throw in additional catalysts like physical AI, and it’s easy to see why it makes sense to buy and hold Nvidia over the long term.
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Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
