Pay Close Attention to This Crucial Revenue Source for Artificial Intelligence (AI) Giant Nvidia

After years of high-flying success, Nvidia (NASDAQ: NVDA) has hit some turbulence in 2025. The company's stock has declined around 20% year to date, losing nearly $1 trillion in market cap. It's also underperforming the major stock market indexes this year.

So where is Nvidia stock headed next, and what key metrics should investors keep a close eye on? Let's dig in and find out.

Image source: Getty Images.

Data center revenue is Nvidia's bread and butter

Over the last three years, Nvidia's revenue has gone through the roof. In its fiscal 2022, the company generated $26.9 billion in revenue. But its trailing-12-month revenue reached $130.5 billion -- a fivefold increase from just three years ago.

The engine behind this growth is Nvidia's data center unit, which generated $115.2 billion, or 88%, of the company's overall revenue in fiscal 2025.

The data center unit designs and sells graphics processing units (GPUs), which are the workhorses used in all the critical stages of artificial intelligence (AI) development: training, inference, and deployment.

As AI models like ChatGPT have taken the world by storm, Nvidia has become the world's leading provider of data center GPUs. In fact, according to Motley Fool research, Nvidia now generates about three times as much data center revenue as its three closest competitors -- Intel, Advanced Micro Devices, and IBM -- combined.

While Nvidia is miles ahead of the competition now, can its lead endure?

The dark clouds on the GPU horizon

Two major worries are hanging over Nvidia right now. One is specific to the AI industry; the other relates to trade policy.

First is whether the red-hot growth of AI models and data centers will cool off. There is major disagreement on this point. Some analysts point to the emergence of DeepSeek AI as a sign that AI models will become more efficient, thus requiring less computing power and, therefore, fewer GPUs to operate. Still, other analysts believe that more efficient AI models will actually increase the need for GPUs as the barriers to building new models decrease.

Whichever side you might be on, one thing is clear: The argument here is whether the growth rate in the GPU market slows, not whether the market shrinks. There is a wide consensus that the overall GPU market will continue growing for many years to come.

The second issue involves trade, specifically between China and the United States. Since governments -- and militaries -- are exploring the potential of AI models, the building blocks of those models (GPUs) have become a national security issue. In particular, the United States has placed export restrictions on some of Nvidia's GPUs -- banning their direct sale to Russia and China, while limiting the number of GPUs sold to other countries such as Saudi Arabia or India.

If the current U.S. export restrictions are further tightened, or if foreign countries impose retaliatory tariffs on U.S. GPUs, Nvidia's data center business could suffer.

In short, trade tensions are weighing on Nvidia, even if its fundamentals remain solid.

Is Nvidia a buy now?

Despite that uncertainty, the stock remains attractive when focusing on said fundamentals. The stock's price-to-earnings ratio stands at 37 as of this writing, not far from the five-year low of 32 it hit in early April.

Moreover, just as trade concerns and data center growth fears materialized earlier this year, they could disappear just as quickly. A change in policy from the Trump administration or another AI-related breakthrough could send the broad market -- and Nvidia stock -- back to all-time highs just as quickly as they've pulled back.

So, for investors willing to hold Nvidia long term, the stock's recent weakness could prove to be an excellent buying opportunity.

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Jake Lerch has positions in International Business Machines and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, International Business Machines, and Nvidia. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.