Everyone is focused on Nvidia's chips, but Jensen Huang has already cultivated a "second pillar."
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While the market's attention is fixed on Nvidia’s AI chips, Jensen Huang has quietly built a “second pillar” worth tens of billions of dollars. This data center networking business, established via strategic acquisition in 2020, has now become one of Nvidia’s most profitable and fastest-growing divisions.
In just a few short years, the networking business aimed at connecting data centers has grown to become Nvidia’s second largest revenue driver, just behind its computing business. According to Nvidia’s latest financial report, the division’s revenue reached $11 billion last quarter, a staggering 267% year-on-year increase, with annual revenue exceeding $31 billion.
This astonishing growth rate and scale have directly reshaped the competitive landscape of the network equipment market. Kevin Cook, Senior Stock Strategist at Zacks Investment Research, pointed out that Nvidia’s quarterly networking revenue now exceeds the annual networking business forecast of long-standing giant Cisco.
The Cornerstone of “AI Factories”
Nvidia’s networking boom is directly fueled by surging AI processing demand. The division’s technology matrix includes NVLink for connecting GPUs on data center racks, InfiniBand Switches for in-network compute platforms, the Spectrum-X AI networking Ethernet platform, and co-packaged optical switches, among others.
This portfolio of technologies forms all the necessary infrastructure for building “AI factories”—data centers devoted to training AI models.
Kevin Deierling, Nvidia’s Senior Vice President of Networking, said, “People usually think of networking as ‘I have a printer, I need to connect it.’ But the day Jensen Huang acquired us, he said that the data center is the new computing unit. Networking isn’t just about moving a little data between compute nodes; it’s actually foundational.”
Vision Behind the $7 Billion Acquisition
The starting point of this massive business was Nvidia’s $7 billion acquisition of Israeli networking company Mellanox in 2020. Deierling joined Nvidia as a result of that acquisition.
Initially, Deierling didn’t fully understand why Jensen Huang bought Mellanox at the time, but now he does. Having the networking business lets Nvidia package its GPUs with perfectly matched networking technology.
“When Jensen Huang acquired Mellanox in 2020, he saw it as the missing piece to make GPUs a complete solution,” analyst Cook said.
Besides technological leadership, Nvidia’s networking success is also due to its unique business model. Deierling explained that Nvidia sells these technologies only as full-stack solutions, not as standalone components, and brings them to market through partners.
“I can’t think of any other company with our kind of full-stack capability,” Deierling said. “We’ve built a complete compute stack, a fully integrated stack, and then deliver it to market through all our partners.”
At the Nvidia GTC Technology Conference on March 16, Nvidia further cemented this advantage by launching a series of network systems updates, including the Rubin platform (with six new chips), the Inference Context Memory Storage platform, and more efficient Spectrum-X Ethernet Photonics switches.
“Networking is no longer an external device for connecting printers or other slow I/O devices,” Deierling emphasized. “It’s fundamental to the computer. In the past, computers had a backplane inside. Today, networking is the backplane of the AI factory—it’s absolutely critical.”
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