Text size
BofA Global Research estimated last week that Nvidia accounts for about 75% of the AI semiconductor market.
Dreamstime
The latest commentary from
Microsoft
and
Alphabet
,
Google’s parent, offers a positive message about the outlook for
Nvidia
,
which leads the market for semiconductors used in artificial intelligence, Jefferies says.
On Tuesday, executives at both technology companies said they plan to invest aggressively in AI infrastructure over the next year.
To support “demand for our AI platform, we will accelerate investment in our cloud infrastructure,”
Microsoft
(ticker: MSFT) CFO Amy Hood said on an earnings call with investors. “We expect capital expenditures to increase sequentially each quarter through the [fiscal] year as we scale to meet demand signals.”
Similarly,
Alphabet
(GOOGL) CFO Ruth Porat said the company plans “elevated levels” of infrastructure investment in cloud data centers for the rest of this year, with continued growth in 2024. She cited AI as the main reason.
Jefferies analyst Mark Lipacis said those remarks made him even more upbeat about Nvidia’s future revenue. The “comments regarding CapEx and AI spending on their earnings calls lead us to believe our above consensus Nvidia estimates may prove conservative,” he wrote.
Nvidia dominates the market for chips used for AI applications. The chip maker’s products have high exposure to generative AI, the technology behind chatbots such OpenAI’s ChatGPT, which unleashed a tide of excitement and speculation when it was released late last year. The technology ingests text, images, and videos and then uses the patterns it finds to create content.
Last week, BofA Global Research estimated that Nvidia accounts for about 75% of the AI semiconductor market. At the time, the Wall Street firm said the industry is in the early stages of a spending shift toward AI infrastructure, with only 10% of cloud servers enabled with chips suited to AI projects.
Microsoft’s and Google’s latest investing plans are evidence the shift to AI infrastructure is truly under way.
Write to Tae Kim at tae.kim@barrons.com