The last several years have flown by in a blur for Nvidia (NASDAQ: NVDA) Investors. With the advent of the artificial intelligence (AI) revolution, there was an intense demand for this technology. graphics processing units (GPUs) That makes artificial intelligence feasible. Being the foremost supplier of these sophisticated processors, Nvidia has emerged as one of the clear winners, seeing its stock increase over eight times within the two-year period leading up to 2025.
Recently, though, the outlook has shifted markedly towards pessimism. The dual impact of U.S. export limitations and worries over the slowdown in AI expenditure growth has put pressure on Nvidia’s stock price, causing it to drop approximately 25% from its highest point (at the time of this statement).
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Nevertheless, insights shared by three of the firm's major clients brought welcome positive developments for Nvidia's shareholders.
The extent of the reduction in data center expenditures has been overblown.
The demand for data centers and servers with the computational horsepower needed for AI fueled a big run-up in capex spending by big tech. This spending helped fuel massive sales increases for Nvidia, as its data center segment generated six consecutive quarters of triple-digit year-over-year growth. However, numerous reports suggested that some of Nvidia's biggest customers were scaling back on data center spending, which sent the stock plunging. But the devil's in the details, and it turns out the sky is not falling after all.
When Microsoft (NASDAQ: MSFT) The company issued its fiscal 2025 third-quarter financial report (ending March 31) revealing unexpectedly solid outcomes, largely fueled by high demand for artificial intelligence technologies. A standout feature was Azure Cloud, recording a 33% increase year-over-year, marking an uptick from the previous quarter’s 31%. Notably, AI-related contributions accounted for 16 percentage points of this growth, surpassing the prior quarter's figure of 13 percentage points.
CEO Satya Nadella dismissed rumors about reduced expenditures on data centers, stating that these fluctuations were simply part of the typical cycle of local data center strategies. “Over the past ten to fifteen years, we have consistently made modifications regarding construction plans—whether they should be built, leased, or at what rate,” he explained. Nadella further emphasized that their priority is aligning the development of regional data centers with market demands. The company aims to avoid an imbalance where some areas might end up oversupplied while others lack sufficient infrastructure.
There were comparable worries about a deceleration in expenditures within the data center sector. Amazon (NASDAQ: AMZN) . Kevin Miller, Amazon's vice president of global data centers, refuted the reports. "There's been really no significant change," he noted. "We continue to see very strong demand, and we're looking both in the next couple of years as well as long term and seeing the numbers only going up."
When Meta Platforms (NASDAQ: META) reported its first-quarter results, the company made a surprise announcement that turned heads. The company revealed plans to increase its 2025 capital expenditures (capex) reaching $68 billion at the mid-point of their guidance range, which is an upgrade from their earlier projection of around $62.5 billion. The firm stated, "This revised estimate takes into account further expenditures for data centers aimed at bolstering our AI initiatives, along with higher anticipated costs related to infrastructure hardware."
As the leading provider of GPUs used to power AI in data centers, Nvidia is poised to benefit from the ongoing data center build-out. This will support the ongoing and accelerating adoption of AI.
The largest clients of Nvidia include some of the most prominent figures in the field of artificial intelligence.
Should any ambiguity remain, the three mentioned above stand out as key leaders in the field of artificial intelligence. and are some of Nvidia's major clients. Although the company has maintained secrecy about the precise purchase details, analysts from Bloomberg have mentioned Barclays Research propose that Nvidia's top four clients--accounting for almost 53% of its income--are:
- Microsoft: 15%
- Meta Platforms: 14%
- Alphabet: 12%
- Amazon: 11%
Several leading figures in technology have recently challenged the idea that investments in data centers and artificial intelligence are decreasing.
Inflation, tariffs, and bears, oh my!
The AI revolution appears robust, yet Nvidia faces ongoing hurdles. Tariffs remain unpredictable and can shift daily. Should these duties instituted under the Trump administration persist, they might drive up semiconductor costs, potentially impacting Nvidia’s performance negatively.
Moreover, certain investors remain hesitant about the potential widespread use of AI and its effect on the company’s prospective expansion. Despite contradictory evidence, this skepticism continues.
Nevertheless, for those investors focusing on the long term, Nvidia appears progressively more attractive. The share price is presently trading at approximately 39 times trailing-12-month earnings, placing the valuation close to its lowest level in more than three years. Additionally, its forward-looking metrics show promise. price-to-earnings ratio Of 26, it's a compelling price to pay for a company driving the AI revolution.
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John Mackey, who previously served as the CEO of Whole Foods Market—an entity now owned by Amazon—is part of The Motley Fool’s board of directors. Suzanne Frey, holding an executive position at Alphabet, also sits on The Motley Fool’s board. Additionally, Randi Zuckerberg, formerly responsible for market development and spokesperson duties at Facebook, and sibling to Meta Platforms CEO Mark Zuckerberg, is likewise a member of The Motley Fool’s board of directors. Danny Vena holds stakes in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool holds shares in and endorses Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. Additionally, The Motley Fool suggests Barclays Plc and proposes these option strategies: purchasing long-term $395 call options on Microsoft for January 2026 and selling short-term $405 call options on Microsoft for the same month. The Motley Fool has a disclosure policy .
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