Nvidia is Quietly Building a Physical AI Ecosystem

Nvidia (NASDAQ:NVDA | NVDA Price Prediction) is probably one of the most obvious trades in all of the AI scene these days. It’s the AI king with the world’s best GPUs. And with the green light to start selling some of its sought-after chips into the Chinese market, there’s room for sales growth to level up, so to speak.

While there’s limited expectation from China, I do think Chinese growth potential in the long term remains a massive wild card, especially as the AI infrastructure buildout looks to kick things up a few notches. Undoubtedly, U.S. firms are spending a fortune on infrastructure.

With more than $650 billion to spend on CapEx, with much of it aimed at AI initiatives, and plenty more to account for from other firms that haven’t yet committed to an annual budget, I do think that Nvidia and the competition look well-positioned to ride this AI wave higher through 2026.

What’s more, though, is that Nvidia is no longer just a play on AI hardware; it’s become quite the powerful software and platform play. With physical AI and robotics likely to catch many off-guard in the next three to five years, there’s going to need to be an industry player (or a couple) that steps up as a platform provider.

Nvidia is the ultimate robotics enabler for the physical AI boom

In these early days, Nvidia has shown that it is such a batter that’s ready to step up, perhaps above everybody else who’s still sitting comfortably on the bench, eating a few sunflower seeds, waiting to see what kind of hit Nvidia can deliver before grabbing the bat. In any case, I think much of the AI chip upside is already priced into Nvidia stock at these levels. Shares have flatlined for quite some time, not because Nvidia’s chip sales are stagnating, but because the reality has finally caught up with expectations.

What’s not in the expectations, at least in my view, is the physical AI ecosystem that could turn the robotics revolution from a sci-fi fantasy into a reality. Of course, world models still need ample work, but given the progress we’ve witnessed in just the past few months, I’d argue that Nvidia and the broad basket of physical AI enablers are ready to ring in the next phase of the AI revolution.

Whether we’re talking about GR00T (the brains for humanoid robots of the future), digital twins (for training physical AI well before it’s uploaded into an actual robot), or the Jetson Thor physical form itself, I think Nvidia is already operating in the distant future while most analysts and investors might be valuing the firm quarter ahead.

Indeed, Nvidia is more than just an AI chip play nowadays, just as Tesla (NASDAQ:TSLA) has pivoted in a way such that it’s no longer just an EV firm; it’s a robotics company and one that’s well-positioned to thrive in the early days of the physical AI revolution. 

Nvidia is a bargain, even as the market enters a show-me stage

Of course, the market has entered a bit of a show-me stage. If you’re spending all these hundreds of billions of dollars, we’re going to need, at the very least, some signs that there’s going to be a return. It doesn’t have to be a massive return before the year’s up, but there should at least be something to show that spending is on the right track and that this isn’t the start of a bubble whose only ending will be in a painful burst.

In any case, I think shares of Nvidia are getting too cheap to ignore at around 45.0 times trailing price-to-earnings (P/E). It might be the cheapest mega-cap robotics play on the market right now. Add China upside and recent AI chip deals with its Mag Seven peers into the equation, and it’s clear Nvidia is a growth play whose shares are stuck for reasons that are beyond the company’s control.