Nvidia's growth engine on the way to a $7.5 trillion valuation
Chip giant Nvidia continues to ride the artificial intelligence wave, but it now turns out that its next growth engine is not just the famous graphics processors. The company's networking technology division recorded record revenue of $14.8 billion in the first fiscal quarter of 2027, a 199% jump compared to the same period last year.
Chip giant Nvidia continues to ride the artificial intelligence wave, but it now turns out that its next growth engine is not just the famous graphics processors. The company's networking technology division recorded record revenue of $14.8 billion in the first fiscal quarter of 2027, a 199% jump compared to the same period last year. This is a direct continuation of a rapid growth trend, after the division's revenue jumped from $8.6 billion in 2024 to $31.4 billion in 2026.
Why have networks become critical?
Modern artificial intelligence (AI) systems currently require not only strong processing power, but also the ability to transfer huge amounts of data quickly between thousands of chips and storage devices. Without a fast enough network, a bottleneck is created that harms processor efficiency and slows down work. Nvidia offers solutions such as NVLink technology for connecting chips within a server, and Spectrum-X systems for connecting between different servers, which allows it to sell a complete package of hardware and communication infrastructure.
According to data from the research firm IDC, Nvidia holds a 21.5% market share of global revenue from Ethernet switches for data centers, a figure that places it as the market leader. However, competition in the field is particularly fierce. The company Arista Networks is breathing down its neck with a market share of 20.7%, a particularly small gap. In addition, customers can choose competing network technologies, and revenues from this field will not always compensate for the potential loss of sales of expensive processors to competitors.
Will the valuation jump to $7.5 trillion?
To deal with the threat of custom chips from its competitors, Nvidia is collaborating with the company Marvell Technologies. As part of this, Marvell will provide custom processors and network hardware, while Nvidia will provide its high-speed connectivity technologies. This collaboration allows Nvidia to profit from the huge investments in AI infrastructure, even when customers choose not to purchase its graphics processors, thereby diversifying its sources of income.
Today, Nvidia is traded at a price-to-earnings ratio of 24.1 for the 2027 earnings forecast. If the company meets analysts' forecasts for earnings of $12.90 per share in 2028 and maintains a similar ratio, its market valuation could approach $7.5 trillion, compared to about $5.3 trillion today. The networking division is no longer a marginal business for it, but a critical part of its future growth.
