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Nvidia shares surged over 11% on Wednesday, fueled by reassuring statements from Microsoft and AMD that allayed concerns about a potential slowdown in AI server investments.
Microsoft CEO Satya Nadella and CFO Amy Hood announced plans to increase spending on Nvidia-based infrastructure in the upcoming year, further solidifying Nvidia’s position as a leading beneficiary of the AI boom. Microsoft’s capital expenditures reached $19 billion in the fiscal fourth quarter, with around 60% allocated to hardware, indicating a robust return on investment from its GPU-based servers.
This news alleviated investor fears that Nvidia’s high AI sales might be tied to an unsustainable arms race among cloud providers. UBS analyst Karl Keirstead noted that Microsoft’s unexpectedly high capex figures could encourage Nvidia and semiconductor investors, reinforcing confidence in Nvidia’s growth prospects.
Nvidia’s stock has doubled in 2024 and increased more than 500% since the release of ChatGPT in November 2022, which ignited substantial investor interest in AI technologies. Morgan Stanley analysts described Nvidia as a “top pick,” dismissing concerns about competitive dynamics, export controls, and supply chain issues as temporary. They highlighted the transition from Nvidia’s H100 series chips to the new Blackwell generation, which could drive further sales.
Additionally, AMD’s recent earnings report revealed better-than-expected sales and earnings, with CEO Lisa Su projecting $4.5 billion in AI chip sales for the year, an 11% increase over prior forecasts. This positive outlook from AMD, coupled with Microsoft’s increased capex, contrasts with rising investor anxieties about overspending and rapid infrastructure expansion.
Goldman Sachs analyst Toshiya Hari supported this optimistic view, suggesting that the strong data center GPU outlook from Microsoft and AMD bodes well for Nvidia’s continued success. Nvidia is expected to report its fiscal second-quarter earnings in August.