Nvidia (NASDAQ:NVDA) is at the forefront of physical AI, a term it uses to describe artificial intelligence systems that operate in the real world, such as self-driving cars and warehouse robots. This technology goes beyond traditional AI applications like chatbots, requiring systems to perceive their environment and make real-time decisions. Nvidia's automotive revenue, a key indicator of its physical AI business, was around $2.35 billion in fiscal 2026, representing just 1% of its total sales. Despite this small share, Nvidia is well-positioned to capitalize on the growing demand for physical AI solutions.
The company already supplies AI systems to major players in the auto industry, with customers spending around $8 billion on Nvidia's AI systems for their own facilities over the past year. Nvidia's offerings include the Jetson Thor computer for robots, the DRIVE Hyperion platform for self-driving cars, and the Cosmos AI models for training and simulation. These products cater to the essential components of physical AI, from training models to real-time decision-making.
While physical AI is still a minor part of Nvidia's business, the company's broader Edge Computing segment, which includes automotive and robotics, saw revenue of $7.2 billion in the second quarter of fiscal 2027. Nvidia's stock price, at around $237 per share, is valued at approximately 15 times its expected earnings per share for fiscal 2028. This valuation reflects the company's strong data center business, which generated $89.0 billion in revenue last quarter, rather than its physical AI initiatives.
Rival Advanced Micro Devices (NASDAQ:AMD) is also making moves in the physical AI space, acquiring World Labs for approximately $8.2 billion to enhance its hardware design capabilities. However, AMD's stock is valued at about 41 times its expected 2027 earnings per share, making it a more expensive investment compared to Nvidia. For investors looking to gain exposure to physical AI without betting on specific robot or car manufacturers, Nvidia presents a simpler and potentially more cost-effective option.