Shares of graphics card specialist Nvidia (NVDA -10.01%) fell hard in 2022 as a major slowdown in the company's growth gave investors a reason to hit the sell button amid the broader stock market sell-off. But it looks like the chipmaker is about to enter 2023 at an advantage. Nvidia stock has rallied impressively over the past three months, jumping 23% as of this writing.

Will Nvidia be able to sustain its hot stock market rally in 2023? Or will the weakness in the chipmaker's gaming business catch up with it and trigger a sell-off once again? Let's find out.

Why Nvidia stock could fly in 2023

There are a couple of solid reasons why Nvidia stock could sustain its rally and head higher in 2023.

The first is the company's data center business, which is doing the heavy lifting right now and is its biggest source of revenue. Nvidia's data center revenue jumped 31% year over year in the third quarter of fiscal 2023 (ended Oct. 30) to $3.83 billion. The segment's impressive growth was driven by the adoption of its data center graphics processing units (GPUs) by multiple cloud computing and server OEMs (original equipment manufacturers), as well as supercomputer operators.

The good news for Nvidia is that the need for graphics cards in data centers is growing rapidly. According to third-party estimates, data center GPU sales could hit nearly $30 billion in 2025, compared to just under $3 billion in 2018. Also, the overall market for data center accelerators is expected to hit nearly $70 billion in 2027, clocking a compound annual growth rate of nearly 39%.

Nvidia should be able to corner a greater share of the data center accelerator opportunity from 2023, as it is set to begin shipments of its Grace server central processing units (CPUs). An entry into server CPUs is going to open a $42 billion addressable revenue opportunity for Nvidia in a market that's currently controlled by rivals Advanced Micro Devices and Intel.

Nvidia is already claiming that its server processors could give AMD a run for its money. As such, it wouldn't be surprising to see the data center business sustain its impressive momentum in the new year. This, however, is just one reason to be optimistic about Nvidia in 2023.

The second reason why Nvidia stock could head higher next year is because of the impressive traction of its automotive business. The third quarter of fiscal 2023 saw Nvidia's automotive revenue jump 86% year over year to $251 million, which means that this business has now hit a $1 billion annual revenue run rate.

The chipmaker's huge automotive design win pipeline worth $11 billion, its relationships with multiple automakers and component suppliers across the globe, and its focus on bringing out more powerful automotive systems should help the automotive business get bigger in 2023 and beyond. These catalysts explain why analysts expect Nvidia to return to growth in the next fiscal year following a flat top-line performance in the current one.

The company's earnings are also expected to jump an impressive 32% in fiscal 2024 (which begins in February 2023) following a sharp decline in the current one. So an improvement in Nvidia's financial performance next year could give the stock a shot in the arm and help it fly.

Why the stock may fall

The continued weakness in the gaming market could weigh heavily on Nvidia in the new year and scupper the stock's rally. The company's gaming revenue declined a whopping 51% year over year in the previous quarter thanks to the weakness in the personal computer (PC) market. Alarmingly, the weak sales of GPUs used in personal computers may have led to a sharp jump in Nvidia's inventory levels.

If Nvidia is unable to move its GPUs quickly in the new year, then it will have to contend with inventory write-downs, higher storage costs, and discounts. All these will have negative impacts on Nvidia's bottom-line performance. And if that's the case, investors are likely to hit the panic button considering the stock's rich valuation.

Nvidia's recent rally brought the stock's price-to-earnings ratio to 70, which is well above its five-year earnings multiple of 58. If Nvidia is unable to match the market's growth expectations in 2023, the stock could take a beating once again.

That's why investors looking to buy Nvidia stock right now may want to tread cautiously. Of course, the company has some notable catalysts in the bag that could power the stock higher in 2023, but at the same time, the gaming business produces a large chunk of its revenue, and it hasn't been in the best shape.

However, the PC market is expected to turn in a better sales performance next year, and that could help boost graphics card sales. If that's indeed the case and Nvidia's other businesses grow as expected, this semiconductor stock could keep soaring in 2023.