I know what you’re probably thinking. Nvidia (NASDAQ: NVDA) is the most valuable company in the world — even bigger than Apple (NASDAQ: AAPL). Why would it need to “become the next Apple”?
Nvidia just had its annual GTC conference. And at that conference, management talked extensively about the boom in artificial intelligence (AI) inferencing and Nvidia’s growing ecosystem that expands beyond graphics processing units (GPUs) to capture more than one-time hardware sales.
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Just as Apple built an ecosystem of consumer products that have become as essential to many households as laundry detergent and toothpaste, so too is Nvidia building an ecosystem primarily for enterprises to create a recurring revenue stream in the age of AI inferencing.
Here’s why this evolving business model could be a game changer for investors by adding balance to Nvidia’s investment thesis.
Image source: Nvidia.
Nvidia’s earnings growth has exploded in recent years as key hyperscaler customers build data centers that rely on Nvidia GPUs. The data center business is so massive that other segments like professional visualization, gaming, automotive, and robotics barely move the needle. In fiscal 2026, the data center segment made up just under 90% of total revenue. And that puts pressure on Nvidia to continue selling GPUs to hyperscalers to maintain its breakneck growth rate.
Nvidia’s latest architecture, Rubin, already addresses part of the problem. It includes six chips that work together to improve efficiency at rack scale for data center applications. Many of Rubin’s breakthroughs are related to AI inference rather than training.
Think of the AI model as the knowledge base that AI agents and tools use to do real-world work. Applying AI models requires immense compute for inference.
The tokenization of inferencing creates a recurring revenue stream for Nvidia. The idea is that hyperscalers will charge customers based on the number of AI inference tokens used. As AI usage for generative AI, AI agents, and physical AI grows, so will the number of tokens demanded. Nvidia’s hardware and software are built to process tokens faster, which will appeal to hyperscalers.
All told, Nvidia’s goal is to create an ecosystem that includes its purpose-built AI chips, networking hardware, and inferencing software that will scale in lockstep with token demand — as inference and physical AI will demand far more tokens than simple chat-based generative AI.
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Nvidia’s road map for capitalizing on inferencing recurring revenue mirrors Apple’s blueprint.
iPhone is the focal point of an ecosystem of Apple products that complement each other — from iPhone to Mac, iPad, Apple Watch, AirPods, etc. This is similar to Nvidia building on its GPU business with “extreme codesign” to capture revenue from AI data center compute, networking, and storage.
Apple has services that directly support those products, like iCloud, as well as services that can be integrated and used by those products — like Apple Music, Apple TV, Apple Card, etc. Nvidia’s recurring revenue stream from AI inference tokens would follow this same business model.
Apple has evolved into a stable, high-margin, moderate-growth company that generates a ton of free cash flow (FCF) to buy back stock and steadily increase its dividend. Similarly, Nvidia expects to spend 50% of its FCF this year on buybacks and dividends. Nvidia only pays a $0.01 quarterly dividend now, but I could see it announcing a massive dividend raise followed by moderate annual increases in a similar vein to what Apple has done for 14 consecutive years.
A potential slowdown in growth sounds like bad news for Nvidia. But in reality, it could just mark the next stage of the company’s maturation.
If Nvidia were able to reduce its dependence on data center hardware through an inferencing-as-a-service revenue stream, it could make the stock more appealing to balanced investors who like a little passive income sprinkled on their long-term holdings. After all, Apple commands a much higher valuation than Nvidia — with Apple trading at 29.3 times forward earnings compared to just 21.9 for Nvidia — suggesting that some investors value predictable earnings growth and balance more than the prospect of hypergrowth.
All told, Nvidia’s build-out of a recurring revenue stream is a brilliant way to help reduce the pain of an eventual pullback in hyperscale capital expenditures — making the stock’s investment thesis even more appealing to long-term investors.
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Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Apple and Nvidia and is short shares of Apple. The Motley Fool has a disclosure policy.
Nvidia Stock Could Become the Next Apple. Here’s What It Means for Investors. was originally published by The Motley Fool
