NVIDIA just dropped another bombshell earnings report, smashing expectations and sending shockwaves through the tech world. Revenue, driven by the insatiable hunger for AI, is skyrocketing, and CEO Jensen Huang is painting a dazzling picture of a future where AI factories churn out digital intelligence like power plants generate electricity. But amidst the euphoria, a subtle undercurrent of concern might be rippling through Huang's words, something that seems to have slipped past the radar of most analysts.

While Huang is exuberantly hyping the transformative power of Blackwell, his next-generation AI platform, and highlighting the staggering demand for H200 GPUs, a closer look reveals a potential bottleneck that could stifle NVIDIA's momentum: networking.

Networking, often relegated to the backseat in discussions of AI infrastructure, is emerging as the critical linchpin in NVIDIA's strategy. Huang himself emphasizes this, stating in the Q1 2025 Earnings Call: "InfiniBand is a computing fabric, ethernet is a network. And InfiniBand, over the years, started out as a computing fabric, became a better and better network. Ethernet is a network and with Spectrum-X, we're going to make it a much better computing fabric. And we're committed -- fully committed to all three links, NVLink computing fabric for single computing domain to InfiniBand computing fabric, to Ethernet networking computing fabric."

This emphasis on networking reveals a deeper truth: the power of NVIDIA's GPUs is useless without the ability to rapidly move data between them. As AI models balloon in size, demanding the interconnection of dozens, even hundreds, of GPUs to function, the network becomes the nervous system carrying the vital signals that allow these models to learn and operate.

Huang's repeated declarations of NVIDIA's "full commitment" to networking, coupled with the announcement of their foray into the Ethernet market with Spectrum-X, might be masking a less optimistic reality. Is NVIDIA struggling to keep pace with the explosive demand for its networking solutions?

Here's the evidence: Despite claiming that "supply of Hopper architecture products is improving," Colette Kress, NVIDIA's CFO, admits that "networking revenue tripled from last year," indicating that networking demand is growing at a much faster rate than overall data center revenue.

Furthermore, when discussing the allocation of H200 and Blackwell products, Huang is quick to emphasize fairness and the need to "avoid allocating unnecessarily," particularly when "the data center is not ready." This suggests a potential concern: what if the data center isn't ready because the networking infrastructure is lagging behind?

Projected Growth in Networking Demand

Based on NVIDIA's Q1 2025 revenue guidance and the reported tripling of networking revenue year-on-year, the following chart illustrates the potential surge in networking demand within a single quarter. Assumptions: Networking accounts for 10% of data center revenue. Data center revenue for Q1 2025 is approximately $25 billion.

Can NVIDIA's supply chain, even with its impressive recent improvements, truly handle such a dramatic surge in demand for complex networking solutions like InfiniBand and Spectrum-X?

If networking becomes a bottleneck, it could have a cascading effect, slowing the deployment of AI factories and, ultimately, dampening NVIDIA's scorching growth trajectory. While Huang's public statements maintain a facade of unwavering confidence, his underlying concern about networking may be a canary in the coal mine, a subtle signal that even amidst the AI gold rush, challenges remain.

"Fun Fact: NVIDIA's iconic green logo is meant to symbolize the company's commitment to environmental sustainability, reflecting their dedication to developing energy-efficient computing solutions."