Microsoft and AMD's bullish remarks boost Nvidia shares, highlighting ongoing demand for AI servers
Nvidia shares surged 13 percent on Wednesday after comments from major customer Microsoft and rival chipmaker AMD indicated continued growth in AI server infrastructure based on GPUs, according to CNBC.
Microsoft's CEO Satya Nadella and CFO Amy Hood announced that the company plans to increase its spending on Nvidia-based infrastructure next year. During the fiscal fourth quarter, Microsoft spent $19bn on capital expenditures, with approximately 60 percent allocated to hardware.
The tech giant reported that it is seeing a return on investment from its expensive GPU-based servers.
These remarks eased investor concerns that Nvidia's elevated AI sales might be linked to a decelerating arms race among cloud providers. Microsoft’s earnings report positively surprised investors, with capital expenditures exceeding expectations at $19bn in the quarter, noted UBS analyst Karl Keirstead.
Nvidia has significantly benefited from the AI boom. Its stock has doubled in 2024 and increased over 500 percent since the release of ChatGPT in November 2022, which sparked intense investor interest in AI technology.
Morgan Stanley analysts named Nvidia a “top pick” on Wednesday, expressing confidence that issues such as competitive dynamics, export controls, and supply chain concerns will “fade with time.”
Analyst Joseph Moore emphasized that customers continue to commit resources to developing multimodal generative AI and are eager to deploy GPUs swiftly.
Moore also noted the transition from Nvidia’s last generation “Hopper” or H100 series chips to the new “Blackwell” generation, which could drive further sales.
Nvidia's primary competitor, AMD, also reported strong earnings and sales on Tuesday. AMD CEO Lisa Su announced an expected $4.5bn in AI chip sales for the year, an 11 percent increase over previous guidance.
Goldman Sachs analysts indicated that Microsoft's and AMD’s positive outlooks contradict investor fears of overspending on Nvidia chips.
Analyst Toshiya Hari stated that AMD’s positive Data Centre GPU business outlook and Microsoft’s increased capital expenditures through FY25 are positive indicators for Nvidia.
Nvidia is set to report its fiscal second-quarter earnings in August.
