Nvidia shares jumped 13% on Wednesday following remarks from major customer Microsoft and rival chipmaker AMD, suggesting that the demand for AI server infrastructure, heavily reliant on Nvidia’s GPUs, remains robust. This surge in stock value reflects a continued confidence in the expansion of AI technologies and the infrastructure required to support them.
Microsoft and AMD’s Positive Outlook on AI Infrastructure Drives Investor Confidence”
Microsoft’s CEO Satya Nadella and CFO Amy Hood revealed plans to increase investment in Nvidia-based infrastructure for the upcoming year. In the fiscal fourth quarter, Microsoft allocated $19 billion towards capital expenditures, with approximately 60% dedicated to hardware, including GPU-based servers. The company’s report indicated a positive return on these investments, alleviating investor concerns about a potential slowdown in the AI server market.
UBS analyst Karl Keirstead noted that Microsoft’s higher-than-expected capital expenditure could reassure Nvidia and semiconductor investors about the continued demand for AI infrastructure. This sentiment was echoed by Morgan Stanley analysts, who named Nvidia a “top pick,” suggesting that worries over competitive dynamics, export controls, and supply chain issues may diminish over time. Joseph Moore of Morgan Stanley emphasized the market’s ongoing commitment to developing multimodal generative AI and highlighted Nvidia’s transition from the “Hopper” or H100 series chips to the new “Blackwell” generation, which is expected to further boost sales.
Adding to the positive outlook, AMD, Nvidia’s main competitor in the data center GPU market, reported better-than-expected sales and earnings. AMD CEO Lisa Su announced an increase in the company’s AI chip sales forecast to $4.5 billion for the year, up 11% from previous estimates. This upward revision, alongside Microsoft’s sustained capital expenditure plans, counters concerns that major tech companies are overinvesting in Nvidia chips and infrastructure too rapidly.
Goldman Sachs analyst Toshiya Hari pointed out that the positive outlook from AMD and Microsoft suggests a strong, ongoing demand for AI technologies, which bodes well for Nvidia’s future performance. Nvidia is scheduled to report its fiscal second-quarter earnings in August, and the market will be closely watching for further insights into the company’s growth trajectory in the AI sector.
Featured Image courtesy of Fox Business
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