The AI leader spends far less on research and development than its big tech peers.
Nvidia (NVDA 0.94%) has dominated stock market headlines over the past year, and for good reason.
The inventor of the graphics processing unit (GPU) is leading the artificial intelligence revolution, as its chips have been in high demand since OpenAI introduced ChatGPT at the end of 2022. Nvidia’s revenue has grew triple digits in each of its last five quarters, and the stock soared. more than 600% since the beginning of 2023, despite its recent pullback.
While Nvidia might not be as well known as some of its “Magnificent Seven” peers Apple, Microsoftand AlphabetThe company now seems to be the most innovative of the big tech companies as it powers the AI era with its hardware. Almost all companies competing or building AI offerings do so with Nvidia chips, and it is expected to raise the bar with the launch of its Blackwell platform in the fourth quarter.
You might think that Nvidia should spend more aggressively on its technology to develop such a leader in AI, but the opposite is true as it actually spends much less on research and development than most of its “Magnificent Seven”.
Data from YCharts.
As you can see, Nvidia spent only $10.6 billion on R&D in the last 12 months, much less than Apple, Microsoft, Alphabet, or Meta Platforms.
But there is more to the story than that.
Image source: Getty Images.
A master of efficiency
By the end of its 2024 fiscal year, Nvidia had spent $45.3 billion on research and development over its history.
Among its fundamental innovations are the GPU in 1999, which led the growth of the PC gaming market, and the launch of the CUDA programming model in 2006, which allowed GPUs to be used for computing general
Nvidia’s GPUs were central to the early development of AI – a network built on its technology won an image recognition competition in 2012. In 2017, the company created its first GPU Tensor Core , used for high-performance computing, and followed that with its first autonomous driving system-on-chips (SOC).
Its pace of innovation has only accelerated since then, and those previous innovations show that the company has been built towards the current AI moment for a generation. And it’s done so by spending less on R&D over its entire history than Alphabet spent in the last year alone.
While Nvidia has scaled its business so effectively, some of its big tech partners have been known to spend billions on boondoggles. Alphabet, for example, invests in projects that may never see the light of day, internally called “pantry mode”.
Meta has also invested tens of billions of dollars in its struggling metaverse, while Apple seems to have missed the mark with the Vision Pro and pulled the plug on its electric vehicle after years of work. Microsoft has also had a number of flops in its hardware business.
What it means for Nvidia
In addition to having significantly lower R&D expenses than its peers, Nvidia also has the highest operating margin in the Magnificent Seven at 62% from its most recent quarter.
Those margins may moderate as the company faces more competition in the data center GPU space, but Nvidia’s impressive profitability and R&D efficiency offer further evidence of the company’s superior execution.
Nvidia has been building a technological foundation for AI for several years, and now it’s reaping the rewards. With its history and momentum, Nvidia will not be easily removed from the throne of the industry. Expect the company to continue to deliver strong growth in its earnings statement in the coming quarters.
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions and recommends Alphabet, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 call on Microsoft and short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.