Nvidia’s Data Center business is now larger than the iPhone business

 

Nvidia’s Data Center business has quickly become larger than the iPhone business, a feat that is nothing less than extraordinary since the iPhone is the most successful product of all time.

The stock market anticipated this by more than a year and a half. On June 5, 2024, Nvidia surpassed Apple to become the most valuable company in the world, ending Apple’s decade-long reign. At that moment, Apple’s business was still bigger. But the business isn’t the stock. The stock market anticipates the future (sometimes correctly, sometimes incorrectly). And what investors saw was Nvidia growing so fast that its business would soon eclipse Apple’s. That’s exactly what happened: Nvidia’s Data Center division is now larger than the iPhone, the best-selling product in history. The stock got there first. The business caught up.

To put this trajectory in perspective, when we bought the stock in early 2017, Nvidia’s Data Center business was doing roughly $1B in sales. It is now currently at a $326B annual rate, and still growing at a fast pace.

The iPhone’s biggest year ever added $44B of revenue (2021, the 5G supercycle). Nvidia’s Data Center segment added $65B in 2024 and $78B in 2025.

There are important similarities to note. Both the iPhone and Nvidia’s Data Center businesses are platforms on which entire economies are built. The App Store allowed third-party software developers to sell to a new audience that was both larger and easier to sell to than previous software sales channels. Businesses like Uber couldn’t have existed without the iPhone and its App Store. Similarly, the Cambrian Explosion in Artificial Intelligence could not have reached its current abilities or scale without Nvidia’s hardware and software fueling the production of AI models and the usage of AI. 

There are similarities in the stock market as well. Wall Street didn’t believe that Apple and the iPhone could grow for as long as it has, or get to the scale that it has reached. Its revenue growth and profit margins were seen as fragile and liable to be taken over by “good enough” phones in short order. During the iPhone’s high-growth years, Apple’s stock price did well, but investors were reluctant to pay higher valuation multiples for this extremely profitable, growing business. 

Nvidia stock has been treated similarly, all of the stock’s gains are driven by its profit growth, with no added valuation optimism since the release of ChatGPT.

Both stocks climbed, but they didn’t get more expensive; they became cheaper as the businesses’ performance outpaced the stock performance.

Both companies saw falling valuations of their stock as the market expected the growth would end soon. But as Nvidia is showing now, just as Apple had in the past, is that when you’re selling into a brand new global market that you’ve created, the opportunities for growth are far beyond what analysts have seen previously. Prior to the iPhone, there was no market for a “smartphone.” Prior to Nvidia’s Data Center GPUs, the market for Artificial Intelligence was nowhere near its current size. 

There’s a paradoxical and persistent skepticism that emerges when something new and great comes into the world. There’s a naive view that there’s nothing new under the sun: that it’s all been seen before and this is just the same story that you need not pay attention to. This viewpoint is mistaken. 

The iPhone changed the world. Artificial Intelligence is remaking it entirely.

Best regards,

Evan McGoff