Nvidia's Overlooked $31.4B Networking Business Could Drive $7.5T Valuation

Nvidia's data center networking business has emerged as a hidden engine of the company's growth, generating $14.8 billion in revenue during its fiscal 2027 first quarter (ended April 26), a 199% year-over-year jump. This figure caps a remarkable three-year run: networking revenue climbed from $8.6 billion in fiscal 2024 to $13 billion in fiscal 2025, then jumped to $31.4 billion in fiscal 2026.

The opportunity exists because modern AI systems depend on more than raw computing power. Training and running sophisticated AI models requires massive data flows among thousands of accelerators and storage devices. If the network infrastructure cannot keep pace, communication becomes a bottleneck that reduces GPU utilization and slows down entire AI workloads. Nvidia's NVLink technology connects GPUs within powerful AI rack systems, while its Spectrum-X Ethernet solution connects servers and racks across larger data centers. As AI clusters scale further, Nvidia has more opportunities to sell this networking and interconnect technology alongside—or even independent of—its computing hardware.

Nvidia already holds the market leadership position. According to research firm IDC, the company captured 21.5% of data center Ethernet switching revenue in the first quarter of 2026, making it the market leader, though Arista Networks trails only marginally at 20.7%. This dominance reflects the strategic importance of networking as AI infrastructure matures.

The strategy extends beyond Nvidia's own chips. Custom AI chips from rivals pose a growing competitive threat to Nvidia's GPU business, but the company has positioned its NVLink Fusion rack-scale platform to work alongside custom processors. The expanded partnership with custom chip designer Marvell Technology exemplifies this approach: Marvell provides custom accelerators and networking hardware to connect those processors at high speed, while Nvidia supplies NVLink high-speed interconnect technology, Spectrum-X switches, ConnectX network adapters, and BlueField data processing units. This allows Nvidia to capture value from AI infrastructure spending even when it does not supply the primary accelerators.

The financial implications are substantial. Nvidia is currently trading at around 24.1 times Wall Street's fiscal 2027 earnings estimate of approximately $9 per share as of August 12. Analysts expect earnings to grow to roughly $12.90 per share in fiscal 2028. If Nvidia delivers on those expectations and maintains its forward valuation, the body notes, its market capitalization could approach $7.5 trillion, up from roughly $5.3 trillion today. However, the body cautions that valuation compression could limit upside even if earnings rise. Competitors remain significant—Arista's near-parity market share and customers' ability to choose alternative networking technologies present real constraints on Nvidia's pricing power and growth in this segment.