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 the graphics processing units (GPUs) That makes artificial intelligence feasible. Being the foremost supplier of these cutting-edge 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.
In recent months, however, the narrative has turn turned decidedly pessimistic. The combination of U.S. export restrictions and concerns about slowing of the AI spending boom has weighed on Nvidia stock, which is down roughly 25% from its peak (as of this writing).
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Nevertheless, insights shared by three of the firm's most significant clients brought welcome positive developments for Nvidia's shareholders.
The slowdown in data center spending has been greatly exaggerated
The surge in demand for data centers and powerful servers required for artificial intelligence led to significant capital expenditure increases among major technology companies. This boost in spending contributed substantially to Nvidia’s revenue, particularly within their data center division, which experienced six successive quarters of more than 100% annual growth. Nevertheless, various reports indicated that several of Nvidia's key clients were reducing investments in data centers, causing the company's stock price to drop sharply. Yet upon closer inspection, it became clear that the situation wasn’t as dire as initially thought.
When Microsoft (NASDAQ: MSFT) The company unveiled its financial report for the third quarter of fiscal year 2025 (ending March 31). Surprisingly, the outcomes proved remarkably solid, fueled primarily by high demand for artificial intelligence technologies. A standout point was Azure Cloud, experiencing a 33% increase compared to the same period last year and accelerating slightly from the previous quarter’s 31%. Notably, this growth included an upward shift where AI-related contributions climbed to account for 16 percentage points, surpassing the prior 13-point contribution seen in Q2.
CEO Satya Nadella downplayed the reports of a slowdown in data center spending, noting this was merely the normal ebb and flow of regional data center planning. "We've always been making adjustments to build, lease, what pace we build, all through the last 10-15 years," Nadella said. He went on to say the company wants to ensure that the regional data center build-outs match the demand. They don't want to be "upside down," having too much capacity in one region and not enough in another.
There were comparable worries about a deceleration in expenditures within the data center sector. Amazon (NASDAQ: AMZN) Kevin Miller, who serves as Amazon’s vice president for global data centers, dismissed these claims. He stated, “There hasn’t actually been much of a shift. We’re still experiencing robust demand, and when examining our projections over the coming few years and beyond, we anticipate this trend will keep rising.”
When Meta Platforms (NASDAQ: META) When it released its first-quarter earnings, the firm stunned everyone with an unexpected declaration. It disclosed intentions to ramp up its efforts towards achieving goals for the year 2025. capital expenditures (capex) Spending is projected to reach around $68 billion at the middle point of their guidance, which is an uptick from their earlier prediction of approximately $62.5 billion. The firm stated, "This revised estimate takes into account extra expenditures for data centers aimed at bolstering our AI initiatives, along with higher anticipated costs related to infrastructure hardware."
Given its status as the primary supplier of GPUs utilized for powering artificial intelligence within data centers, Nvidia stands to gain significantly from the continuous expansion of these facilities. Such growth will facilitate the sustained and rapid uptake of AI technologies.
The largest clients of Nvidia include some of the most prominent figures in the field of artificial intelligence.
Lest there be any doubt, the three aforementioned companies are among the biggest players in AI and are among Nvidia's biggest customers. While the chipmaker has kept the exact order close to the vest, analysts with Bloomberg and Barclays Research suggest that Nvidia's four biggest customers -- responsible for nearly 53% of its revenue -- are:
- Microsoft: 15%
- Meta Platforms: 14%
- Alphabet: 12%
- Amazon: 11%
Several of these technology leaders have recently challenged the idea that investments in data centers and artificial intelligence are decreasing.
Inflation, tariffs, and bears, oh my!
It’s evident that the AI revolution is thriving, yet Nvidia faces ongoing hurdles. The state of tariffs acts as an unpredictable factor and can shift daily. Should the duties enforced under the Trump administration persist, this could lead to increased costs for chips, potentially impacting Nvidia’s outcomes negatively.
Moreover, certain investors remain cautious about the potential widespread use of AI and its effect on the company’s future expansion. Despite contradictory proof, this pessimism continues unabated.
Nevertheless, for those investors focusing on the long term, Nvidia appears progressively more attractive. At present, the stock is trading at approximately 39 times its trailing- twelve-month earnings, a valuation close to its lowest level in more than three years. Additionally, its forward-looking metrics suggest further potential. price-to-earnings ratio of 26 is an attractive price to pay for a company powering the AI revolution.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Barclays Plc and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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