Hyperscalers Plan for Major Capex Increases in 2025, Boosting NVIDIA's Prospects

In recent financial disclosures, leading hyperscalers such as Amazon, Microsoft, Alphabet, and Meta announced their third-quarter results along with updates on their capital expenditure plans. Amid a growing demand for artificial intelligence (AI) technologies, these companies are set to significantly increase their spending.

Projected Capex Growth

Morgan Stanley internet analyst Brian Nowak reported that the capital expenditure for these hyperscalers is projected to exceed $300 billion in 2025. This marks a remarkable 25% increase from 2024 and is nearly double the amount spent in 2023. In light of this trend, Nowak revised his forecasts, upping the capex estimates for 2025 by 9%.

Among these giants, Amazon and Microsoft are expected to be the largest investors, with projected spending of approximately $96.4 billion and $89.9 billion, respectively. According to Nowak, the collective spending among Amazon, Alphabet, Meta, and Microsoft is anticipated to be around $300 billion to $335 billion in 2025 to 2026 as they continue to invest heavily in generative AI and large language models (LLM).

NVIDIA's Competitive Advantage

The significant increase in capital expenditures primarily benefits NVIDIA, a leading producer of high-performance AI chips essential for the new infrastructure these companies are developing. BofA Securities analyst Vivek Arya forecasts that NVIDIA will maintain over 75% of the AI accelerator market share through 2027, while other major players like Advanced Micro Devices (AMD) and Broadcom are projected to secure only single-digit shares.

Overall, Arya expects the AI accelerator market to grow to $280 billion by 2027, potentially exceeding $400 billion in the following years. The current market is valued at approximately $45 billion, highlighting the substantial growth opportunities.

This influx of investment by hyperscalers in AI technology signifies not only their commitment to innovation but also a promising future for NVIDIA, positioning it as a key player in the evolving tech landscape.

AI, Capex, NVIDIA