April 29 was a major day for the stock market as the “Big Three” in the cloud industry, Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), all released their latest quarterly reports. The market cheered Alphabet and Amazon’s results — both companies saw their shares jump post-earnings — while Microsoft wasn’t so lucky. However, one corporation that was arguably a big winner, despite its quarterly update not being due for another three weeks, is Nvidia (NASDAQ: NVDA). Here is why.
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A consistent theme emerges
Alphabet, Microsoft, and Amazon are spending small fortunes on artificial intelligence (AI) capital expenditures. And by the looks of it, they will maintain that pace for the foreseeable future. Management commentary supports this outlook. Consider Alphabet, whose CFO, Anat Ashkenazi, said that most of the company’s capex spending in the first quarter was to support its AI opportunities. She also predicted that spending would significantly accelerate in 2027 compared to this year.
Turning to Microsoft, the company expects $190 billion in capex for the calendar year 2026, much of which will be spent on CPUs (Central Processing Units) and GPUs (Graphics Processing Units). The company’s CEO, Satya Nadella, also highlighted the large AI addressable market for which the company needs to spend heavily to tap into. So we could also see increased spending from Microsoft next year and beyond.
Finally, Amazon had projected investing $200 billion in capex this year. It recorded less than a quarter of that, $43.2 billion, through March 31. Amazon’s capex spending so far this year has been primarily focused on its cloud business and GenAI. The company also said that it intends to continue investing heavily in AI to capitalize on attractive growth opportunities. So, the trend across these three major cloud players is clear.
Why this is good for Nvidia
Nvidia’s business is famously concentrated. During its latest fiscal year, two direct customers accounted for 36% of the company’s revenue. Nvidia doesn’t tell us who they are, but it’s likely two of the Big Three cloud companies. This is a major risk: If Amazon, Alphabet, or Microsoft stops spending billions on Nvidia’s chips, its business will suffer. Some might think that this could happen soon. Amazon has a booming AI chip business. The company doesn’t sell its hardware to external customers. It installs it within its data centers and makes it available to its clients via its cloud business, Amazon Web Services (AWS).
Story Continues
One of Amazon’s chip franchises, Trainium, is seeing incredible demand. The company’s Trainium4 is already receiving orders, despite not being available for another 18 months. However, Amazon will continue to buy racks of AI chips from Nvidia, if we can believe the words of the company’s CEO, Andy Jassy. As he said,
While the largest number of AI chips we are bringing in are Trainium, we continue to have a deep partnership with Nvidia. We have immense respect for them, continue to order substantial quantities, will be partners for as long as I can foresee, and we will always have customers who want to run Nvidia on AWS.
Amazon’s chips may be the better, cost-effective options in many cases, but Nvidia’s chips remain the most powerful on the market. Here’s what it means for Nvidia’s future: Despite fears that demand for its products will slow, the biggest spenders are sending the opposite message. And these three aren’t the only ones. Plenty of other tech leaders and major players in other sectors — including Meta Platforms and Tesla — are spending heavily to advance their AI-related goals.
Is Nvidia stock a buy?
Nvidia’s shares have crushed broader equities over the past three years, but the company still has plenty of upside. Revenue and earnings growth should maintain a healthy clip for the foreseeable future. Competition may intensify, but Nvidia has built an incredible moat. It benefits from high switching costs thanks to its CUDA platform. And the company will continue to innovate. Nvidia’s upcoming Vera Rubin platform will be even more powerful than its Blackwell, and it won’t stop there. My view is that we may still be in the early innings of the AI transformation, and few corporations are as well-positioned to capitalize on it as Nvidia. The stock can still take investors on a wild, northbound ride over the next decade.
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Prosper Junior Bakiny has positions in Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
Major Hyperscalers Just Reported Earnings. Nvidia Was The Winner was originally published by The Motley Fool
