Nvidia's Q2 results reveal a stark divergence between gaming and data center segments, with gaming revenue dropping 33% YoY to $2.04B while data center grew 61% to $3.81B. The company's strategic pivot toward AI infrastructure is paying off as enterprises accelerate AI investments, though crypto mining collapse and gaming inventory corrections created near-term headwinds. Gross margin compressed 645bps YoY to 43.5% amid inventory write-downs. Management expects AI demand to offset gaming weakness through 2023, supported by the H100 GPU ramp.
Key Risks
China export restrictions threaten 7-10% of revenue
Automotive design wins building future growth pipeline
Bottom Line
Nvidia's Q2 results demonstrate successful execution of its AI-focused strategy despite gaming headwinds. The company's dominant AI training position and expanding software ecosystem provide strong foundation for continued data center growth. While gaming recovery timing remains uncertain, management's decisive inventory actions should normalize the segment by Q4. Key metrics to watch include data center customer wins, H100 ramp progress, and margin recovery trajectory. The shift toward AI infrastructure positions Nvidia well for sustainable growth, though competition bears monitoring.