NVIDIA's Data Center Sales Soar 56% in Q2: Can It Keep the Momentum?

Core Insights - NVIDIA Corporation's data center business is critical, with Q2 fiscal 2026 revenues rising 56% year-over-year to $41.1 billion, making up approximately 89% of total revenues of $46.74 billion, driven by the Blackwell platform and orders from major hyperscalers [1][10] Group 1: Data Center Business Performance - The near-term outlook for the Data Center business is positive, with ongoing AI factory buildouts and increasing orders from governments and enterprises for AI infrastructure expected to drive demand for NVIDIA's AI chips [2] - The networking business, including NVLink and Spectrum-X, enhances data movement efficiency within AI clusters, making NVIDIA's full-stack approach attractive to enterprises and governments [3] - The U.S. government's approval for exporting H20 AI chips to China is anticipated to further boost Data Center revenues, alongside NVIDIA's development of less powerful Blackwell architecture AI chips for the Chinese market [4] Group 2: Market Position and Competitors - NVIDIA's deep integration of hardware, networking, and software positions it strongly in the AI infrastructure market, with a Zacks Consensus Estimate for fiscal 2026 Data Center revenues at $181.03 billion, indicating a 57% year-over-year growth [5] - Competitors like Advanced Micro Devices (AMD) and Intel are expanding their presence in the AI data center space, with AMD's MI300X GPUs gaining traction and Intel promoting its Gaudi 3 AI chips as cost-effective options [6][7] Group 3: Financial Performance and Valuation - NVIDIA's shares have increased approximately 31.9% year-to-date, outperforming the Zacks Computer and Technology sector's gain of 18.2% [8] - The company trades at a forward price-to-earnings ratio of 32.23, higher than the sector average of 28.62 [11] - The Zacks Consensus Estimate for NVIDIA's fiscal 2026 and 2027 earnings suggests year-over-year increases of about 48.5% and 38.9%, respectively, with upward revisions in estimates over the past 30 days [14]