What happened

Shares of semiconductor leader Nvidia (NVDA -3.87%) were under pressure today, down 3.4% as of 12:30 p.m. ET. There was no company-specific news causing the slump in stock price. However, after a multi-week rally off of lows in late June, tech stocks in general were taking a breather. The Nasdaq Composite was down 1.4%. 

So what

Nvidia stock has actually been quite resilient in recent weeks after revealing its preliminary financial results for Q2 2023 (the three-month period ended in July). Including today's drop, shares are actually slightly up since the company announced Q2 revenue would only be $6.7 billion, not the $8.1 billion originally forecasted.  

Consumer electronics sales, especially PCs and laptops, are headed for decline in the back half of 2022. This is putting a dent in the company's gaming GPU (graphics processing unit) sales for high-end video game graphics. To help move inventory, Nvidia and its retail partners have been cutting prices. Besides a big decline in revenue, it also led to a big drop in profit. Adjusted gross margin on products sold is expected to be about 46%, far lower than the 67% originally expected. Ouch!

Now what

Given the deteriorating outlook, why is Nvidia stock holding strong in the last couple weeks? For one thing, the gaming segment downturn may be short lived. Every couple of years, the company releases refreshed GPUs that improve on graphics performance. New hardware could be announced in September at Nvidia's next semi-annual GPU Technology Conference. That might explain, in part, the fire sale on in-stock gaming devices to make way for the new stuff.

In the meantime, stay focused on the data center segment -- which is now Nvidia's largest end market where its specialized GPUs are powering AI for businesses. Based on the preliminary news, data center sales were up 61% in Q2. If this division continues firing on all cylinders, it could go a long way toward offsetting temporary declines in gaming. Until the consumer electronics downturn ends, though, Nvidia's stock price could remain quite volatile from day to day. Stay tuned for more when Nvidia hosts a quarterly update on Aug. 24.