In recent years, numerous companies have redirected their budgets toward investing in artificial intelligence (AI). This trend is especially prominent among cloud giants such as Microsoft, Alphabet, and Amazon, as well as other technology leaders including Meta Platforms and Oracle.
This year alone, Meta allocated $14.3 billion to Scale AI and established a new research initiative called Meta Superintelligence Labs (MSL). Additionally, Meta entered into a six-year, $10 billion partnership with Google Cloud. At the same time, Microsoft secured a $17.4 billion agreement with Nebius, an emerging player in the neocloud sector.
At the heart of this massive surge in AI infrastructure spending is one primary beneficiary: Nvidia ( NVDA 0.43%). Whether through direct or indirect channels, this leader in graphics processing units (GPUs) is capturing a considerable portion of the capital being funneled into AI infrastructure.
Let’s take a closer look at how major tech firms are transforming the AI sector—and why this ongoing growth trend could mean substantial gains for Nvidia.
AI infrastructure investment has surged since ChatGPT’s debut
Since ChatGPT was introduced in November 2022, a dramatic acceleration in AI development has taken place among the world’s top corporations. It’s critical to note that their spending in this area is not just continuing but rapidly increasing.
AMZN Capital Expenditures (TTM) data by YCharts.
Information from Goldman Sachs highlights the scale of this transformation. In 2021, the combined capital expenditures of Alphabet, Meta, Amazon, and Microsoft totaled about $100 billion. By next year, analysts on Wall Street predict that number will approach $500 billion.
How does this impact Nvidia?
Developing and running large language models (LLMs) and generative AI systems requires immense computing resources. GPUs, thanks to their ability to handle parallel processing, are among the most effective chips for handling the demands of AI workloads. Nvidia currently holds over 90% of the GPU market share, giving it a dominant role in the AI supply chain.
A large share of the recent boost in AI spending is being directed toward GPUs and the data center infrastructure that supports their optimal use.
This situation puts Nvidia in an exceptionally strong position as the foundation of today’s AI innovation, making it the top choice for cloud providers and data center operators eager to acquire the latest Nvidia chips as soon as they hit the market.
Image source: Getty Images.
Should you consider Nvidia stock?
The vast sums being invested in cloud infrastructure by hyperscalers reflect more than just an endless need for AI computing capacity. They reveal a deeper shift: AI has become the primary engine for these companies’ future growth, and obtaining access to the most advanced hardware is now critical for staying ahead of competitors.
The fact that spending is accelerating indicates that companies are still at the beginning stages of their AI adoption journey. This surge in infrastructure investment is not simply a passing trend; it’s the outcome of careful, long-term strategies by leading firms as they move away from traditional business models and venture into areas like robotics, autonomous technology, cybersecurity, and beyond.
For Nvidia, this trend should result in continued pricing strength for its products, reliable and recurring demand, and several years of rapid expansion ahead. Its GPUs and CUDA software are now the benchmark for enterprise-level AI systems.
NVDA PE Ratio (Forward) data by YCharts.
Altogether, these factors indicate that Nvidia could see its valuation rise even further. As the current stage of AI infrastructure development unfolds, Nvidia appears set to remain a key driver of major tech companies’ evolution.
For all these reasons, I believe Nvidia stock stands out as an obvious choice for investors and represents one of the most attractive long-term investment opportunities available today.
