Nvidia generating $10B in DGX cloud revenue 'not difficult to envision:' UBS
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Investment firm UBS said it believes Nvidia (NASDAQ:NVDA) is currently generating roughly $1B in DGX cloud revenue, but after speaking with customers, it said it is "not difficult to envision" the tech giant generating significantly more than that.
Analyst Timothy Arcuri, who has a buy rating and $560 price target on Nvidia (NVDA), said it's likely that the company could generate as much as $10B in revenue per year from the division, especially as more cloud service providers move to the system and Nvidia expands its use cases. 
"As the service extends to other [cloud service providers] and NVDA expands its capacity corridor at each CSP, it is not unreasonable to think that this could potentially be a ~$10B/yr business once we tack on the a-la-carte model options," Arcuri wrote in an investor note. 
Arcuri's reasoning is that Nvidia can still add on additional products to the DGX Cloud, including pre-trained models, access to the H100 GPU, which he said are still "very hard" to get access to, the ability to scale up and down as needed and "essentially seamless integration" with existing cloud or on-premise infrastructure.
Arcuri added that even though Nvidia is projected to generate roughly $100B in revenue next year, $10B for DGX Cloud is still a sizable opportunity for the Jensen Huang-led company and it "reduces friction for enterprises to adopt AI and should create an inference opportunity for NVDA once these models are deployed." 
In addition, Arcuri added that the margin on the incremental software revenue would be likely 90% or higher, using the roughly 60% on the monthly fee for DGX Cloud.
Nvidia (NVDA) shares rose 1.3% in early trading on Monday.

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