Is NVDA's Networking Unit Becoming a Core Growth Engine Amid AI Boom?

NVIDIA Corporation’s NVDA networking business is rapidly emerging as a critical pillar supporting the artificial intelligence (AI) boom. In recent quarters, its networking revenues have grown faster than many other business segments. In the fourth quarter of fiscal 2026, the company’s networking revenues reached roughly $11 billion, surging more than 3.5 times year over year. For the full fiscal year, the networking unit’s sales soared 142% year over year to approximately $31 billion.

As AI models grow larger and more complex, customers need faster and more efficient ways to connect thousands of processors. This trend is boosting demand for NVIDIA’s networking products, including NVLink, InfiniBand and Spectrum-X Ethernet. These solutions are designed to move data quickly between graphics processing units, which is critical for both training and inference workloads.

Cloud service providers and AI-focused data center operators are building large clusters that require high-speed interconnects. NVIDIA benefits from this shift because its networking hardware is tightly integrated with its compute platforms. Customers often buy the full system rather than mixing components from multiple vendors, which increases the total value of each deployment. This integrated approach strengthens its competitive edge and locks customers into its ecosystem.

NVIDIA’s growing networking business also supports its margins. High-performance switches and interconnects carry attractive pricing, especially when sold as part of a larger AI system. As cluster sizes increase, networking content per data center also rises, increasing margins.

Overall, AI networking appears well-positioned to support NVIDIA’s next phase of growth. If AI workloads continue to scale, networking could become an even more meaningful contributor to NVDA’s long-term revenues. The Zacks Consensus Estimate for the company’s fiscal 2027 networking revenues is pegged at $48.68 billion, indicating year-over-year growth of approximately 55%.

How Rivals Fare Against NVIDIA in Networking Space

NVIDIA faces competition from Broadcom Inc. AVGO and Arista Networks, Inc. ANET in the AI networking space.

Broadcom is a leader in Ethernet switching and custom silicon solutions, providing high-performance chips that form the backbone of modern data centers. Its strong relationships with hyperscalers like Google and Amazon allow it to deliver networking hardware tailored for large-scale AI and cloud workloads.

Arista Networks is another important rival, specializing in high-speed Ethernet switches used in AI and cloud environments. Arista Networks’ software-driven architecture and scalable systems make it a preferred choice for cloud service providers building AI clusters.

NVIDIA’s Price Performance, Valuation and Estimates

Shares of NVIDIA have risen around 56.8% over the past year compared with the Zacks Semiconductor – General industry’s gain of 49.9%.

NVIDIA One-Year Price Return Performance

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From a valuation standpoint, NVDA trades at a forward price-to-earnings ratio of 21.51, below the industry’s average of 23.27

NVIDIA Forward 12-Month P/E Ratio

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The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 and 2028 earnings implies a year-over-year increase of approximately 66.7% and 30.6%, respectively. Estimates for fiscal 2027 have been revised downward by a penny over the past seven days to $7.95 per share. Earnings estimates for fiscal 2028 have been revised upward by 4.9% to $10.39 per share in the past seven days.

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

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

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