Nvidia (NVDA  ) shares were slightly higher following the company's Q3 results which showed a beat on the top line but a miss on the bottom line. The company's results are closely monitored by analysts and investors as it's considered a leading indicator of the prospects of the tech industry. And based on these results, it's clear that enterprise spending in segments like data centers and cloud computing remain strong but all the other categories are dealing with brutal recessions.

Overall, Nvidia shares are down by 44% YTD. Even despite the company's share price dropping, its valuation continues to improve. Currently, the stock has a P/E of 69 and a forward P/E of 37, while it's had a triple-digit EPS for much of the past few years. It's also a standout with 33% profit margins and the company's dividend is tiny at 0.1% but it's likely to grow fast, giving the stock another appeal.

Inside the Numbers

In Q3, Nvidia reported earnings per share of $0.58 which came in below analysts' consensus expectations of $0.69 per share in earnings. Revenue topped at $5.9 billion vs $5.8 billion which was 17% lower than last year. For Q4, the company is forecasting $6 billion in revenue which is slightly below estimates of $6.1 billion.

A big factor in the stock's recent decline is weakness in gross margins due to lower demand from China for data center chips. Overall, gross margins were down to 53.6% from 64% last year.

Gross margin for the third quarter was down 11.6 percentage points to 53.6%, which the company attributed to taking an inventory charge because of low demand for data center chips in China. Revenue was down 17% on a year-on-year basis. It does see gross margins recovering into next year back to the mid-60% range.

Until about a few months ago, semiconductor stocks seemed to be insulated from the economic and market weakness as enterprise spending remained strong even while consumer demand weakened. This is clearly not the case as orders have been slashed and many of its customers are now dealing with excess inventories.

As a result, the company is slowing hiring and focusing on costs. For the first time in years, Nvidia's products are being discounted. Previously, there had been shortages and high prices on secondary markets due to strength in gaming and cryptocurrencies.