Why Nvidia Q2 Results Matter for Indian IT Stocks and the AI Rally

Nvidia Q2 Result: Nvidia’s latest results have strengthened the global artificial intelligence trade, easing concerns that the rapid pace of AI spending could be losing momentum. The company beat expectations on revenue, earnings and current-quarter guidance, while its data-centre business continued to post triple-digit growth.

The read-through is important for Indian markets, particularly the IT sector. Indian IT stocks have rallied sharply in recent months as investors looked for relatively attractive valuations while parts of the global semiconductor market corrected. A stronger Nvidia outlook could now challenge that rotation.

What did Nvidia report in Q2?

Nvidia reported quarterly revenue of $96.2 billion for the second quarter ended July 26, more than double the year-earlier level. Profit was $2.22 per share, excluding certain items.

Nvidia’s data-centre business remained the biggest growth driver, with revenue rising 117% year-on-year to $89 billion, compared with an average estimate of $85.8 billion.

For the current quarter, Nvidia expects:

• Revenue: $108 billion, plus or minus 2%

• Gross margin: Around 74%

• Fiscal 2028 revenue growth: Approximately 70%

2028 revenue growth outlook was particularly notable, as analysts had projected growth of about 45% for that year.

Chief Financial Officer Colette Kress said demand was accelerating even at Nvidia’s scale, while CEO Jensen Huang said the AI infrastructure build-out was operating at full speed.

Nvidia shares rose more than 4% in late trading following Kress’ remarks.

What does Nvidia’s outlook say about the global AI trade?

The results provide a fresh indication that demand for AI infrastructure remains strong. Nvidia has now reported sales above Wall Street estimates for 16 consecutive quarters, although the stock has fallen the day after five of its last six earnings reports.

That changing market reaction highlights a key shift. Investors appear less concerned about whether AI demand exists and more focused on how much future growth is already reflected in valuations.

The results come after weakness across parts of the semiconductor industry. Shares of Micron Technology and SanDisk had fallen as much as 28% over two months, while Samsung Electronics and SK Hynix declined 25-30%.

Fund flows had also shown some cooling in investor positioning, with Taiwan-dedicated funds recording two consecutive weeks of outflows and South Korea seeing $758 million of outflows.

Nvidia’s strong numbers therefore help address concerns that the semiconductor correction reflected a collapse in AI demand.

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Why does Nvidia’s result matter for Indian IT stocks?

The Indian market read-through is more mixed.

Nifty IT index gained nearly 20% over the past two months as global investors moved towards Indian IT services amid sharp corrections in semiconductor stocks. Valuation comfort, attractive yields and strong domestic liquidity also supported the move.

However, Nvidia’s stronger-than-expected outlook could alter the direction of global technology flows.

When investors reduce exposure to expensive AI hardware stocks, Indian IT services can become a relative-value alternative. A sustained AI infrastructure outlook could instead encourage investors to move capital back into AI hardware and infrastructure companies.

This creates a potential rotation risk for Indian IT stocks, which have increasingly been viewed as an “anti-AI” or defensive trade.

The impact is therefore less about Nvidia directly changing the earnings outlook for Indian IT companies and more about where global technology investors choose to allocate capital.

What are the risks to the AI rally?

Despite the strong results, questions around valuations and the sustainability of AI investment remain.

Nvidia faces increasing competition from companies developing their own chips, while memory shortages are putting pressure on the broader AI supply chain. The company has also notified customers that it is raising product prices to account for higher memory costs.

Nvidia’s investment agreements with AI companies have also raised concerns about circular financing and whether such arrangements could contribute to artificial demand.

The company continues to seek greater access to China, where purchases of its AI chips have faced restrictions and delays.

For Indian investors, these factors remain relevant because they can influence the direction of global technology capital and, consequently, the relative attractiveness of Indian IT stocks. 

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What does this mean for Indian investors?

Nvidia’s results provide strong evidence from the source material that AI infrastructure demand remains robust, but the market reaction also shows that strong growth alone may not be enough to drive sustained valuation expansion.

For Indian IT stocks, the immediate issue is the potential reversal of the recent rotation. The Nifty IT rally has been supported by valuation comfort and attractive yields, but a stronger global AI infrastructure outlook could redirect some technology-focused capital towards semiconductor and AI infrastructure companies.

Conclusion: What does this mean for your portfolio?

Nvidia’s Q2 results have reinforced the global AI investment story, with revenue reaching $96.2 billion and the company forecasting approximately 70% revenue growth in fiscal 2028. For Indian investors, the key takeaway is the potential impact on capital flows. A renewed preference for AI hardware and infrastructure could limit the momentum of the recent rally in Indian IT services, making the direction of global technology investment flows an important factor to watch.