How Does Nvidia Make Money? (NVDA)

2018 was a breakthrough year for Nvidia Corporation (NVDA) — until it wasn't. Nvidia is a graphics processing chip manufacturer that currently generates most of its revenue from the sales of graphics processing units (GPUs), which are used for competitive gaming, professional visualization, and cryptocurrency mining. Riding on the coattails of a cryptocurrency boom, the graphics processing company soared 42.18% in 2018 to a record share price of $289.36 on Oct. 1. Just over one month later, on Nov. 15, 2018, Nvidia delivered disappointing Q3 FY19  revenue guidance, falling short of analysts' expectations by about $700 million. The company's stock tumbled as much as 19% in after-hours trading and settled at $164.43 as of Nov. 16, 2018 market close.

Telecommunications company SoftBank delivered the latest blow to Nvidia on Dec. 11, 2018, when it announced that it would be selling its entire stake in the chipmaker. SoftBank first disclosed that it had a $4 billion stake in Nvidia on May 24, 2017. The value of the stake at that time means that SoftBank had acquired 4.9% of Nvidia, which is less than the 5% threshold beyond which a regulatory filing is required in the U.S. Nvidia slid by more than 3% to $147.15 a share on Tuesday afternoon following the report from SoftBank.

But Nvidia is more than graphics processing chips. Over the past two years, Nvidia has announced and launched several initiatives that resulted in past successes and may just guide future comebacks. Here's how the company's main revenue-generating products are fairing in November 2018.

Nvidia reported record revenues of $9.71 billion in its FY18 annual report in February, up 41% from $6.91 billion a year before. That growth can be credited in large part to the company's expansion in the GPU industry. In fiscal 2018, Nvidia added 34 GPU-accelerated systems to the Top 500 Supercomputer List, bringing the company's total to 87. One of the company's most popular GPU products, "Nvidia GeForce," is usually integrated with laptops, PCs, and virtual reality processors. Other products driving the growth of the segment include Quadro, Tesla and GRID.

Tesla, of no relation the electric automaker, is a specific GPU accelerator that runs simulations, deep learning algorithms, and helps data analysts process information faster. Quadro is another of Nvidia's products aimed at professional graphics content designers, including movie set designers, design engineers, and geoscientists. Nvidia GRID helps to accelerate virtual desktops and applications to deliver quality graphics to the users within the network from the server.  

The second-largest reportable segment for Nvidia Corporation is Tegra, which combines a GPU and a CPU into one chip. The product is designed to support online gaming, entertainment devices, drones, artificial intelligence, and — most importantly — self-driving cars. Early in 2015, Nvidia announced a partnership with ride-hailing company Uber, who was looking to expand into the autonomous vehicle sector. The company first began to launch city trials in Pittsburgh, Pennsylvania in the fall of 2016 and launched a second pilot program in Phoenix, Arizona in early 2017, logging more than 2 million autonomous miles in that time. In fall 2016, Nvidia also announced that the Tegra processor would be used in all Tesla Motors (TSLA) vehicles. In fiscal 2018, Nvidia announced that it had expanded its hold over the autonomous vehicle sector by developing NVIDIA DRIVE, the world's first functionally-safe self-driving platform. 

As of January 2018, Tegra generates only an eighth of total company sales, but the segment provides a solid starting point for Nvidia Corporation to expand into the growing autonomous vehicles industry.