NVIDIA's Data Center Grows Fast: Can It Sustain the Momentum?

NVIDIA Corporation’s NVDA Data Center business has become its primary growth engine, driven by increasing demand for artificial intelligence (AI) infrastructure. In the first quarter of fiscal 2026, Data Center revenues jumped 73.3% year over year and 9.9% sequentially to $39.1 billion. This robust growth was primarily driven by the strong adoption of the new Blackwell platform and continued orders from hyperscalers like Microsoft, Google and Amazon.

The near-term outlook seems bright for the Data Center business. Continued buildouts of AI factories worldwide, as well as growing orders from governments and enterprises looking to secure sovereign AI infrastructure are likely to continue driving demand for NVIDIA’s AI chips.

The company’s networking business, including NVLink and Spectrum-X, is also contributing to growth by enabling faster and more efficient data movement within AI clusters. These add-ons make NVIDIA’s full-stack approach more appealing to enterprises and governments building AI infrastructure.

Latest approval from the U.S. government for exporting H20 AI chips to China will further boost its Data Center revenues. Additionally, NVIDIA is reportedly working on developing less powerful Blackwell architecture AI chips specially for China, which could further aid Data Center prospects.

NVIDIA’s deep integration of hardware, networking and software gives it a strong position. The company’s leadership in AI infrastructure suggests that its Data Center segment is well placed to sustain momentum. The Zacks Consensus Estimate for fiscal 2026 Data Center revenues is pegged at $177.42 billion, indicating strong year-over-year growth of 54%.

NVIDIA’s Rivals Pushing to Capture AI Data Center Demand

While NVIDIA leads in AI data centers, rivals Advanced Micro Devices AMD and Intel INTC are working hard to expand their presence.

Advanced Micro Devices is witnessing growing adoption for its MI300X GPUs. Several hyperscalers are testing AMD’s solutions as alternatives to NVIDIA’s Blackwell, especially in cost-sensitive or specialized AI workloads. Advanced Micro Devices is also building a strong software stack to grab more customers.

Intel is focusing on both CPUs and AI accelerators to grab a market share in the data center space. The company is promoting its Gaudi 3 AI chips as a low-cost option for training and inference. Intel is also working with major cloud providers to expand the adoption of its AI hardware.

NVIDIA’s Price Performance, Valuation and Estimates

Shares of NVIDIA have risen around 30.3% year to date compared with the Zacks Computer and Technology sector’s gain of 10.7%.

YTD Price Return Performance

From a valuation standpoint, NVDA trades at a forward price-to-earnings ratio of 34.78, higher than the sector’s average of 27.24.

Forward 12-Month P/E Multiple

The Zacks Consensus Estimate for NVIDIA’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 42.8% and 32.6%, respectively. Estimates for fiscal 2026 and 2027 earnings have been revised upward in the past seven days.

NVIDIA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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