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Nvidia’s stock experienced a significant rise as fears surrounding a potential slowdown in AI spending, triggered by the emergence of a new AI model from China’s DeepSeek, began to dissipate. Recent announcements from major tech companies indicate robust capital expenditure plans, reinforcing investor confidence in Nvidia’s market position.
Key Takeaways
- Nvidia’s stock rose over 4% following positive earnings reports from major tech firms.
- Alphabet announced a capital expenditure of $75 billion for 2025, exceeding analyst expectations.
- Cumulative capital expenditures from Alphabet, Meta, and Microsoft are projected to reach $228 billion in 2025.
- Analysts maintain a positive outlook on Nvidia, citing strong demand for AI infrastructure.
Nvidia’s Stock Performance
Nvidia’s stock (NVDA) saw a notable increase of more than 4% on Wednesday, following a period of uncertainty. The initial sell-off was prompted by concerns that companies might reduce their spending on Nvidia’s high-cost AI chips due to the introduction of DeepSeek’s AI model. However, the latest earnings reports from major tech players have alleviated these fears.
Big Tech’s Spending Plans
Alphabet’s recent announcement of a $75 billion capital expenditure plan for 2025 has been a significant factor in boosting Nvidia’s stock. This figure surpasses Wall Street’s estimates of $57.9 billion and highlights the ongoing commitment of major tech firms to invest in AI and data center infrastructure.
- Projected Capital Expenditures for 2025:
- Alphabet: $75 billion
- Meta: Part of the cumulative $228 billion
- Microsoft: Part of the cumulative $228 billion
This represents a 55% increase from the approximately $150 billion spent by these companies in 2024.
Analyst Insights
Tom Lee, head of research at Fundstrat, emphasized that Alphabet’s increased spending is a clear indication that capital expenditure plans for AI and data center investments remain strong. He noted that despite the emergence of DeepSeek, there has been no significant change in spending intentions from Nvidia’s major clients, including Microsoft and Meta.
Bank of America analyst Vivek Arya reiterated a “Buy” rating for Nvidia, setting a price target of $190 per share. Arya pointed out that cloud capital expenditure intentions remain solid, further supporting Nvidia’s position in the market.
Market Reactions
While Nvidia’s stock surged, not all chipmakers shared the same fate. AMD’s shares fell approximately 7% after disappointing outlooks for its data center business. However, analysts believe that this decline is more of a short-term issue specific to AMD rather than a reflection of the overall market demand for AI infrastructure.
Ruben Roy, a technology analyst at Stifel, stated that hyperscaler spending on AI infrastructure continues to grow, indicating a long-term positive outlook for both Nvidia and AMD. He highlighted that Nvidia remains a top choice for investors looking to capitalize on the AI infrastructure boom.
Conclusion
The recent surge in Nvidia’s stock amidst a backdrop of strong capital expenditure plans from major tech companies underscores the resilience of the AI market. As firms like Alphabet, Meta, and Microsoft continue to invest heavily in AI and data centers, Nvidia is well-positioned to benefit from this ongoing trend, alleviating fears of a slowdown in spending.
Sources
- Nvidia stock pops as Big Tech spending boom cools DeepSeek fears, Yahoo Finance.
