Published on: February 02, 2025

Why Nvidia is (still) undervalued

Difference Between CPU and GPU

To understand Nvidia's market potential, it's crucial to distinguish between CPUs and GPUs. A CPU (Central Processing Unit) is designed for general-purpose computing, excelling at single-threaded performance and sequential task execution. In contrast, a GPU (Graphics Processing Unit) consists of thousands of cores optimized for parallel processing, making it ideal for tasks that require massive data throughput, such as graphics rendering, AI, and scientific computing. As AI, gaming, and data-intensive applications expand, the demand for high-performance GPUs has skyrocketed—putting Nvidia at the forefront of this technological shift.

CUDA: The Secret Weapon

Nvidia's CUDA (Compute Unified Device Architecture) is a game-changer in parallel computing. Unlike traditional graphics-focused GPUs, CUDA allows developers to leverage GPUs for general-purpose computing, including AI, deep learning, and scientific simulations. CUDA has built a massive software ecosystem, making Nvidia's GPUs the go-to hardware for AI model training. This competitive advantage means companies and researchers are deeply invested in Nvidia's technology, creating a long-term dependency on its ecosystem.

The Big Bet

Nvidia isn't just leading the AI and gaming industries—it's making strategic investments in areas that could redefine computing.

  • Cosmos: AI Supercomputing for the Future Nvidia is betting big on AI-driven computing with its Cosmos initiative, a new class of supercomputers designed to accelerate AI model training at an unprecedented scale. As AI models grow in size and complexity, demand for Nvidia's GPUs will surge.
  • Latest Developments Nvidia has recently made significant strides in AI and high-performance computing:
    • H100 GPU: Nvidia's latest H100 GPU, based on the Hopper architecture, offers unprecedented performance for AI and HPC workloads.
    • DGX Cloud: Nvidia has launched DGX Cloud, a cloud-based AI supercomputing service that provides instant access to powerful AI infrastructure.
    • AI Foundations: Nvidia introduced AI Foundations, a suite of cloud services for training and deploying large language models and other generative AI applications.

Final Thoughts

Despite its strong position in AI, gaming, and emerging markets, Nvidia is still undervalued because many investors focus only on short-term revenue fluctuations. With its dominance in GPU computing, CUDA ecosystem, and ambitious bets on AI and high-performance computing, Nvidia has the potential to shape the future of computing—and its stock price may not fully reflect that potential yet.

Nvidia's recent financial performance and market position further support this view:

  • Record Revenue: In Q1 2024, Nvidia reported record revenue of $7.19 billion, up 19% from the previous quarter.
  • AI Demand: The company is experiencing unprecedented demand for its AI chips, with major cloud service providers and enterprises rushing to build AI infrastructure.
  • Market Leadership: Nvidia maintains a dominant position in the GPU market, with a market share of over 80% in discrete GPUs.

These factors, combined with Nvidia's continuous innovation and strategic investments, suggest that the company's long-term growth potential may still be underestimated by the market.