Can NVIDIA's Networking Business Power the Next Phase of Growth?

Core Insights - NVIDIA Corporation's networking business is becoming a significant growth driver due to the increasing complexity of AI models, which necessitates faster connections between processors [1][5] Group 1: Networking Business Growth - NVIDIA's networking revenues grew 162% year over year and 13% sequentially in Q3 of fiscal 2026, reaching a record $8.19 billion [2][10] - The demand for high-speed interconnects from cloud service providers and AI-focused data center operators is benefiting NVIDIA, as its networking hardware is integrated with its compute platforms [3][10] - The increasing size of AI clusters is leading to higher margins for NVIDIA's networking products, as high-performance switches and interconnects are sold at attractive prices [4] Group 2: Future Revenue Projections - The Zacks Consensus Estimate projects NVIDIA's networking revenues to reach $29.34 billion in fiscal 2026, indicating a year-over-year growth of approximately 126% [5][10] Group 3: Competitive Landscape - NVIDIA faces competition from Broadcom and Arista Networks in the AI networking space, with Broadcom being a leader in Ethernet switching and custom silicon solutions [6] - Arista Networks specializes in high-speed Ethernet switches and is favored by cloud service providers for building AI clusters [7] Group 4: Stock Performance and Valuation - NVIDIA's shares have increased by approximately 19.6% over the past six months, outperforming the Zacks Semiconductor – General industry's gain of 17.5% [8] - The company trades at a forward price-to-earnings ratio of 27.52, which is lower than the industry average of 29.29 [12] - Earnings estimates for fiscal 2026 and 2027 have been revised upward, implying year-over-year increases of approximately 55.5% and 54.4%, respectively [15]