The Bank of Japan remains on hold as scheduled, with the situation in the Middle East and oil prices becoming the biggest variables in the inflation outlook!

# Long Yue

Source: Wall Street CN

Nvidia’s networking business has quietly become the company’s **second-largest revenue source**, behind only its computing business. In the latest fiscal quarter, the unit generated **$11 billion in revenue**, surging 267% year over year, with full-year revenue exceeding **$31 billion**. Analysts note that Nvidia’s quarterly networking revenue has already surpassed the **full-year networking revenue estimate** of legacy networking giant Cisco.

While the market fixates on Nvidia’s AI chips, Jensen Huang has quietly built a multi-billion-dollar “second pillar.” The data center networking business, strategically assembled via acquisitions starting in 2020, has grown into one of Nvidia’s most profitable and fastest-growing divisions.

In just a few years, the networking business — focused on interconnecting data centers — has become Nvidia’s second-largest revenue driver, trailing only the compute business. According to Nvidia’s latest earnings report, the unit posted **$11 billion in revenue** last quarter, jumping 267% year over year, and more than **$31 billion** for the full year.

This explosive growth and scale have reshaped the competitive landscape of the networking equipment market. Kevin Cook, Senior Equity Strategist at Zacks Investment Research, pointed out that **Nvidia’s quarterly networking revenue now exceeds the full-year networking revenue forecast for Cisco**, the long-dominant incumbent.

## The Foundation of the “AI Factory”

The boom in Nvidia’s networking business directly stems from surging demand for AI computing. The division’s technology portfolio includes:

- NVLink for connecting GPUs across data center racks

- InfiniBand switches for in-network computing

- Spectrum-X, its AI-optimized Ethernet platform

- co-packaged optical switches

Together, these technologies form the full infrastructure required to build **“AI factories”** — data centers purpose-built for training large AI models.

Kevin Deierling, Senior Vice President of Nvidia’s networking business, said:

“People typically think of networking as ‘I have a printer and need to connect it.’ But from day one after we were acquired, Jensen Huang said: **the data center is the new compute unit.** Networking is not just moving small amounts of data between compute nodes — it is actually foundational.”

## The Foresight of a $7 Billion Acquisition

The origins of this massive business trace back to Nvidia’s **$7 billion acquisition of Israeli networking firm Mellanox in 2020**. Deierling joined Nvidia through that deal.

Initially, Deierling did not fully grasp why Huang bought Mellanox at the time — but he now understands. Owning networking allows Nvidia to **bundle GPUs with perfectly matched networking technology** as a complete solution.

“When Jensen Huang bought Mellanox in 2020, he saw this was the missing piece to make the GPU a complete solution,” analyst Cook said.

Beyond technological leadership, Nvidia’s networking success also stems from its unique business model. Deierling noted that Nvidia **only sells these technologies as part of a full-stack solution**, not as individual components, and goes to market through partners.

“I can’t think of another company that has the full-stack capabilities we do,” Deierling said. “We built the full compute stack, a fully integrated stack, and then take it to market through all of our partners.”

At the **Nvidia GTC conference on March 16**, Nvidia further strengthened this advantage by launching a series of networking updates, including:

- the Rubin platform (with six new chips)

- the Inference Context Memory Storage platform

- the more efficient Spectrum-X Ethernet Photonics switch

“Networking is no longer a peripheral for connecting printers or other slow I/O devices,” Deierling emphasized. **“It is fundamental to the computer.** In the past, computers had a backplane inside. Today, **the network is the backplane of the AI factory** — and it is extremely important.”

## Risk Warning and Disclaimer

The market involves risks, and investments require caution. This article does not constitute personalized investment advice and does not take into account each user’s specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this article are solely at your own risk.