Nvidia’s Shares Soar as Microsoft and AMD Signal Continued AI Infrastructure Buildout
Nvidia shares experienced a significant 13% increase on Wednesday following positive remarks from major customer Microsoft and rival chipmaker AMD, indicating a sustained growth in the multibillion-dollar buildout of AI servers utilizing GPUs.
Microsoft’s CEO Satya Nadella and finance chief Amy Hood announced on Tuesday that the company plans to increase its spending on Nvidia-based infrastructure in the upcoming year. During the fiscal fourth quarter, Microsoft allocated $19 billion to capital expenditures, with the majority being invested in hardware, particularly GPU-based servers. The tech giant also indicated that it is seeing a favorable return on investment from these expenditures.
The news from Microsoft alleviated concerns among investors about the possibility of a slowdown in Nvidia’s AI sales, which were thought to be connected to an arms race among cloud providers. UBS analyst Karl Keirstead noted that Microsoft’s robust capex of $19 billion exceeded expectations and could be a positive sign for Nvidia and semiconductor investors.
Nvidia has been a key player in the AI boom, with its stock price doubling in 2024 and surging over 500% since the release of ChatGPT in November 2022, sparking increased investor interest in AI technology. Morgan Stanley analysts named Nvidia a “top pick,” citing diminishing concerns related to competitive dynamics, export controls, and supply chain issues.
In addition, AMD, Nvidia’s primary rival in the data center GPU market, reported better-than-expected sales and earnings, indicating strong demand for their GPUs. AMD CEO Lisa Su projected $4.5 billion in AI chip sales for the year, an 11% increase from previous estimates. This optimistic outlook from AMD, along with Microsoft’s commitment to Nvidia-based infrastructure, suggests a positive trajectory for Nvidia in the AI market.
Looking ahead, Nvidia is set to report its fiscal second-quarter earnings in August, which will provide further insights into its performance and market position in the burgeoning AI industry.
Overall, the recent developments with Microsoft and AMD signal a promising future for Nvidia, reaffirming its position as a major player in the AI hardware market and highlighting the continued growth potential in the industry.
