This Under-the-Radar Business Could Become an Enormous Growth Driver for Nvidia

Nvidia (NASDAQ: NVDA) is known for serving some of the world's biggest tech companies, from Meta Platforms to OpenAI, and cloud service providers like Amazon and Microsoft. They are among the company's biggest customers as they rush to get in on top artificial intelligence (AI) chips and related products.

This customer base has helped Nvidia reach mind-boggling levels of revenue in recent years. In the latest fiscal year, reported this week, Nvidia delivered a 65% increase in revenue to more than $215 billion. And the company is optimistic this momentum will continue as it expects a year-over-year revenue increase of about 77% for the next quarter.

While tech companies remain key revenue drivers for Nvidia, they may not be the only source of growth in the years to come. In fact, the following under-the-radar business could become an enormous growth driver for the chip giant.

Image source: Getty Images.

Offering AI customers all they need

First, a quick look at Nvidia's current situation. The company designs graphics processing units (GPUs), or AI chips, as well as networking equipment and other tools -- so it offers customers all that they need for their AI projects. Nvidia sells this equipment to cloud service providers so they can offer it to their customers, and Nvidia sells directly to customers as well.

All of this has translated into significant earnings growth and stock performance over the past few years as the AI boom picked up speed.

Now, let's consider another big revenue driver -- beyond the tech giants -- that already is emerging. This is one that hasn't been making the headlines, but Nvidia mentioned it during its latest earnings report. And this opportunity is sovereign AI, or the development of AI by countries, so that they can control their platforms and develop them according to their laws and customs. This may include relying on local clouds or building custom AI models, for example.

$30 billion in revenue

Nvidia said that last year its sovereign AI business more than tripled to $30 billion, and this was driven by demand from Canada, France, the Netherlands, Singapore, and the U.K. The company predicts that the sovereign AI opportunity will advance "at least in line with the AI infrastructure market."

Nvidia likens the movement to markets like electricity or the internet, with countries controlling at least some part of the build-out and operations.

This offers Nvidia another major growth driver as countries or government agencies turn to the company for help along this path. If Nvidia is right and most or all countries get involved in sovereign AI, it could clearly supercharge Nvidia's already strong growth and become a major revenue driver. And that's fantastic news for long-term shareholders.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.