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Why NVIDIA Stock Climbed 26% in August

By John Ballard – Updated Sep 2, 2020 at 3:10PM

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The graphics specialist continues to benefit from growing data center spending.

What happened

NVIDIA (NVDA -1.51%) delivered robust operating results when it reported its fiscal second-quarter earnings on Aug. 19. Investors loved it, sending the stock up 26% for the month, according to data provided by S&P Global Market Intelligence.

For the quarter, revenue increased by 50% year over year to $3.86 billion led by tripled-digit growth in the data center business, which benefited from the inclusion of Mellanox, a provider of networking products and solutions for data centers, which NVIDIA recently acquired for $7 billion.  

Two men walking past a row of servers.

Image source: Getty Images.

So what

NVIDIA saw strong demand for gaming laptops, driving a 26% increase in sales in the gaming segment. NVIDIA also credited strength in Tegra system-on-a-chip products, which it makes for the Nintendo Switch. 

But the data center segment stole the show, with revenue surging 167% year over year to $1.7 billion, becoming NVIDIA's largest segment. Excluding Mellanox, NVIDIA continued to see strong demand across several markets, including cloud service providers, public cloud providers, supercomputing centers, enterprises, telecommunications, and industrial applications. 

Now what

NVIDIA expects a strong fiscal third quarter, with data center expected to be up in the low- to mid-single-digit range sequentially over the previous quarter. Gaming should be up 25% sequentially, driven by higher sales of console products for the Nintendo Switch. 

Looking further out, while NVIDIA continues to ramp its Ampere architecture for data center, it just announced the Ampere RTX 30 series products for gaming, which deliver industry-leading performance at competitive price points. 

With the new RTX 30 graphics cards, NVIDIA will be locked and loaded for the anticipated holiday season, with highly anticipated games launching along with the new consoles from Sony and Microsoft

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Ballard owns shares of Microsoft and NVIDIA. The Motley Fool owns shares of and recommends Microsoft and NVIDIA. The Motley Fool recommends Nintendo and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nvidia Stock Quote
$168.76 (-1.51%) $-2.59
Nintendo Stock Quote
$10.56 (-0.19%) $0.02

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