Nvidia (NVDA) shares rose 5.21% on Wednesday following an announcement from Google parent Alphabet (GOOGL) regarding its plan to increase spending on artificial intelligence infrastructure.
Nvidia shares rise as Alphabet boosts AI spending plans
Alphabet stated on Tuesday that it intends to allocate up to $75 billion for capital expenditures in 2025, significantly surpassing prior analyst expectations of $58 billion. The majority of this investment will be directed toward enhancing its AI infrastructure, particularly servers and data centers, to accommodate the rising demand for AI technologies.
Alphabet’s CEO, Sundar Pichai, expressed confidence in the ongoing partnership with Nvidia, highlighting the company’s commitment to utilizing Nvidia’s Blackwell platform for its needs. This news comes shortly after major technology firms Meta Platforms (META) and Microsoft (MSFT) announced their own substantial expenditure plans for AI infrastructure, with Meta planning to spend between $60 billion and $65 billion this year and Microsoft anticipating an $80 billion investment in fiscal 2025.
Broadcom sees gains amid increased investments
Broadcom (AVGO), known for designing custom AI chips for various large tech companies including Alphabet and Meta, also experienced a share price increase of nearly 6% to $235.69 on Wednesday. Nvidia’s stock increased by approximately 4%, closing at $123.43. In addition, other chip manufacturers and partners of Nvidia, such as Arm Holdings (ARM) and TSMC (TSM), saw higher share values.
Last week, shares of semiconductor companies, including Nvidia, Advanced Micro Devices (AMD), and Micron Technology (MU), faced pressure following concerns over a Chinese startup, DeepSeek. The company’s success in training AI models at significantly lower costs than its American counterparts raised fears of a potential drop in demand for crucial components like graphics processing units (GPUs). However, these concerns may not be justified.
Meta’s perspective on AI hardware needs
During a call with analysts, Meta CEO Mark Zuckerberg reassured investors of their continued demand for AI chips from Nvidia and AMD. He highlighted that while DeepSeek’s method of using less computational power is intriguing, it does not necessarily translate to reduced chip demand. Instead, he speculated that a shift in focus from model training to inference might occur, necessitating sustained investments in data center capacity to support the processing needs of AI models as they engage users.
Meta intended to invest $39.2 billion in chips and data center infrastructure in 2024, with plans to increase this to $65 billion this year, further developing its Llama large language models (LLMs). The Llama models, which recently achieved 600 million downloads, are poised for continued advancement with the expected release of Llama 4 this year.
On February 26, Nvidia will report its official fiscal year 2025 results, where preliminary estimates indicate a significant revenue increase to approximately $128.6 billion, with a substantial portion stemming from its data center segment, assisted by GPU sales.
In the meantime, the broader market’s reaction to Alphabet’s increased capital expenditure plans and the ongoing commitment from major tech players suggest a robust demand outlook for AI infrastructure and associated chip technologies.
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Featured image credit: Nvidia
