It was not that long ago that Nvidia’s (NASDAQ:NVDA) gaming segment represented its main revenue generator. In fact, it was only in 2020 that its data center segment surpassed it for the first time to claim main breadwinning status.
Since then and until a recent recovery, gaming revenues had been slowing down, affected by the overall softness in the gaming market.
But while Nvidia’s incredible success over the past year has been driven by the huge opportunity offered by the rise of AI and the outsized demand for NVDA’s best-in-class chips, there’s reason to believe the gaming segment is on the up again.
The September monthly sales reported by Taiwanese add-in graphics card/OEMs such as Gigabyte/MicroStar showed September sales that represented a 19% month-over-month increase (up 58% year-over-year). This compares favorably to the 3-year average seasonality of +12% MoM.
This bodes well for the upcoming October quarter report, says Citi analyst Atif Malik. “With August + September Taiwan gaming related sales tracking ~85% of the Street’s +7% Q/Q Oct-Q NVDA gaming sales expectations (Citi +3%), we see the Oct-Q gaming sales tracking above current expectations,” noted the 5-star analyst.
There are other encouraging developments. NVIDIA’s CFO Colette Kress emphasized at the Citi Global Tech Conference that Nvidia’s GPU-powered laptops have become increasingly popular and are now surpassing the sales of desktop GPUs in various global regions. Likewise, during the earnings call for the July quarter, the company mentioned that gaming revenue may see a shift with the July and October quarters standing out as the strongest periods in the year, aligning with the back-to-school and holiday laptop manufacturing schedules. That said, while Malik thinks gaming “may outperform expectations,” he anticipates the data center business will remain Nvidia’s “leading sales driver.”
To this end, Malik maintained a Buy rating on NVDA shares to go alongside a $630 price target. Investors could be sitting on gains of 34%, should Malik’s forecast play out over the coming months. (To watch Malik’s track record, click here)
Overall, 37 other analysts join Malik in the bull camp and are up against 1 lone Hold, naturally making the consensus view here a Strong Buy. The average price target currently stands at $649.82, suggesting shares will climb 38% higher over the next year. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
