Nvidia's Physical AI Business Set to Drive Stock Value to $10 Trillion

Nvidia's shares have surged in recent years due to the generative AI revolution. However, the company is also leading another technological revolution that could be a significant long-term driver for its stock: the autonomous vehicle and robotics market.

This market, or 'physical AI' as Nvidia CEO Jensen Huang calls it, includes companies like Alphabet's Waymo and Tesla, which are already offering robotaxis in several cities. Nvidia has signed partnerships with key players in this space, including Uber, Toyota, Stellantis, Mercedes-Benz, BYD, and Geely.

The company's Jetson Thor supercomputer is widely considered the market leader for raw AI inference and robotics simulation, and it's being used by a range of companies, from Boston Dynamics to Meta and OpenAI. While Nvidia's automotive business currently generates only $2.3 billion in revenue, the company expects this figure to grow to $100 billion within the next decade.

The physical AI business is less cyclical than the data center segment, as transportation is a constant need. Additionally, Nvidia uses a recurring software-as-a-service model for part of its AV business, including the Drive AV stack, which could give this business a higher multiple than Nvidia's hardware business.