Nvidia’s $1 trillion ambitions draw cheers as software becomes a bigger piece of the pie

Breaking things down, Nvidia estimates a total addressable market of $100 billion for gaming, $300 billion for chips and systems, $150 billion for artificial-intelligence enterprise software, $150 million for Ominverse enterprise software, and $300 billion within automotive.

“These are very large numbers and investors will clearly want to peel the onion back before underwriting such growth,” wrote Evercore ISI’s C.J. Muse. Still, he noted the company’s “historical advantage” and $29 billion of research and development spending over the past 20-plus years, factors that make him and his team “firm believers in the company’s hardware and software strategies that should deliver world-class organic growth for years to come.”

Muse has an outperform rating and $375 price target on Nvidia’s stock, which is off 0.8% in Wednesday’s session, after declining 0.8% in Tuesday’s session, on the day of the company’s presentation.

What stuck out the most to many analysts were new details on Nvidia’s opportunities in software, which several acknowledged could come to make up half of the company’s sales over time.

“Currently, running at maybe a couple hundred million dollars today (a bit of enterprise and Omniverse, some DGX support, and some stuff in auto), NVDA sees their overall future TAM as being driven significantly by software ($150B, Omniverse, $150B AI Enterprise, and a meaningful portion of the $300B auto
TAM),” wrote Bernstein’s Stacy Rasgon.

In his view, Nvidia offered a “clearer picture of the broader strategy,” showing how the various pieces of its business could work together in allowing Nvidia to achieve its “Omniverse” ambitions.

“We have joked at times that (despite being Gen-X) we feel a little too ‘boomer’ to wrap our heads around what Omniverse/Metaverse means here, but we think we are starting to get an inkling of what might be possible as we go down this road,” he wrote, while reiterating an outperform rating and $350 price target on the shares.

Chief Executive Jensen Huang described Nvidia’s Omniverse offering as “integral to robotic systems, the next wave of AI” while speaking at the company’s Tuesday presentation.

Rosenblatt Securities analyst Hans Mosesmann was also enthused by the roadmap for Nvidia’s software business.

“The level of software optimization and touch points that the company has established for over a decade, we believe, is simply unmatched by any one technology company (in and/or out of the world of semiconductors),” he wrote, while keeping a buy rating and $400 price target on Nvidia’s stock.

Raymond James analyst Chris Caso highlighted that Nvidia sees its software total addressable market as three times larger than that for gaming. This is “notable since gaming is currently 45% of revenue,” he wrote.

Caso has a strong buy rating on Nvidia’s stock, which has doubled over the past 12 months as the S&P 500
SPX,
-1.23%
has risen 15%.