Table of Contents
Nvidia’s stock experienced a notable rise amid concerns regarding a potential slowdown in AI spending, particularly following the introduction of a new AI model by China’s DeepSeek. Despite initial fears, recent earnings reports from major tech companies indicate robust capital expenditure plans, reassuring investors about the ongoing demand for Nvidia’s AI chips.
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
Last week, Nvidia’s stock faced a significant sell-off due to concerns that the AI spending boom might be cooling off. Investors were worried that companies would seek cheaper alternatives for their AI needs, particularly after the unveiling of DeepSeek’s new AI model. However, as earnings reports from major tech companies rolled in, it became clear that spending intentions remained strong.
Big Tech’s Capital Expenditure Plans
On Tuesday, Alphabet (GOOGL) announced plans to invest $75 billion in capital expenditures for 2025, surpassing Wall Street’s estimates of $57.9 billion. This announcement, along with similar projections from Meta (META) and Microsoft (MSFT), indicates a cumulative capital expenditure of $228 billion for these companies in 2025, marking a 55% increase from the previous year’s spending of approximately $150 billion.
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 robust. He stated, “Even if one thinks DeepSeek represents a threat to those figures, the overall spending intentions are still strong.”
Bank of America analyst Vivek Arya reiterated a Buy rating on Nvidia, setting a price target of $190 per share. Arya noted that despite the emergence of DeepSeek’s optimizations, there has been no change in spending intentions from Nvidia’s major customers, including Microsoft and Meta. He remarked, “Nvidia is the leading platform for delivering compute.”
Market Reactions
While Nvidia’s stock surged, not all chipmakers shared the same fate. AMD (AMD) saw its shares decline by about 7% after disappointing outlooks for its data center business. However, analysts believe that AMD’s challenges are more company-specific and that the long-term demand for both Nvidia and AMD’s chips remains strong.
Ruben Roy, a technology analyst at Stifel, stated, “Hyperscaler spending on AI infrastructure is continuing to move up and to the right. We think there will be a number of beneficiaries as that long-tailed investment cycle continues. Nvidia, which we like a lot, remains our top way to play AI infrastructure compute.”
Conclusion
The recent rise in Nvidia’s stock reflects a broader trend of sustained investment in AI and data center infrastructure among major tech companies. As fears of a spending slowdown dissipate, Nvidia appears well-positioned to capitalize on the ongoing demand for its AI chips, reinforcing its status as a leader in the tech industry.
Sources
- Nvidia stock pops as Big Tech spending boom cools DeepSeek fears, Yahoo Finance.
