Nvidia Corp. is riding high in 2023 as indications suggest that Big Tech companies are increasing their investment in artificial intelligence (AI) products. As a leading manufacturer of graphics processing units, Nvidia is poised to benefit greatly from this trend.
Despite Meta Platforms Inc. announcing a reduction in its capital expenditure forecast for 2023, the AI rally shows no sign of slowing down. Jefferies analyst Mark Lipacis points out that Nvidia will still gain from Meta’s $3 billion reduction, as it does not affect AI spending—a sector where Nvidia excels.
Shares of Nvidia have risen over 3% to reach an intraday high of $469.82 on Thursday, reflecting a remarkable 220% surge in 2023 alone. In comparison, the PHLX Semiconductor Index is up 51%, and the S&P 500 Index has risen by 20%.
According to Lipacis, the reduced forecast is primarily the result of cost savings, particularly on non-AI servers, and adjustments in capital expenditure due to project delays and equipment deliveries. This indicates a strategic shift towards efficient allocation of resources.
Looking ahead, although Meta’s spending plans for 2024 are yet to be finalized, it is expected that capex will see further growth during that period.
Nvidia’s Positive Outlook: A Boost for AI Advancement
In a recent report, industry analyst Lipacis commended Meta’s positive remarks on capital expenditure (capex) and artificial intelligence (AI) spending, particularly in relation to tech giants Microsoft and Google. This positive sentiment had a notable impact on Nvidia, a company that had earlier released a new line of AI-focused GPUs.
While there is a general optimism surrounding capex, BofA Securities analyst Vivek Arya provided a word of caution. He underscored that the positive commentary may not benefit all companies equally. However, Arya expressed enthusiasm for Nvidia’s role in advancing AI in the enterprise, recognizing the company’s critical position in the industry.
Nvidia has further solidified its position in the AI space with the introduction of the AI Lighthouse program. Through strategic partnerships with ServiceNow Inc. and Accenture PLC, the program aims to assist businesses in developing their own generative AI systems.
Nonetheless, investing in AI carries its own risks. The concern arises from the potential reduction in spending on traditional systems as companies allocate more resources to AI initiatives. This news may be less favorable for competitors such as Advanced Micro Devices Inc., which released its own AI chips this year, and Intel Corp., which is set to report its earnings soon.
In light of these developments, Arya highlighted the importance for hyperscalers to demonstrate profitability from their AI projects. This could potentially lead to more cautious data center capex spending patterns moving forward.
As Nvidia continues to make strides in AI technology and collaboration, their positive outlook and innovative initiatives position them at the forefront of the ever-evolving AI landscape.
