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Why Nvidia Stock Jumped Today

By Joe Tenebruso – Updated Oct 26, 2021 at 4:26PM

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The semiconductor leader is poised to profit from Big Tech's arms race.

What happened

Shares of Nvidia (NVDA 2.84%) climbed on Monday after Facebook (META 3.01%) announced a massive increase in its capital spending plans for 2022.

As of 3:07 p.m. EDT, Nvidia's stock price was up more than 7%. 

So what 

In its third-quarter earnings release, Facebook said that it intends to allocate as much as $34 billion toward capital expenditures next year, which would represent a year-over-year increase of up to 79%. The lion's share of its investments will be geared toward bolstering the social media giant's data center network and other technology infrastructure. 

The inside of a data center.

Facebook's data center buildout could be a boon for Nvidia. Image source: Getty Images.

Nvidia is as a leading producer of graphics processing units (GPUs) that power artificial intelligence (AI) applications in data centers and other computing markets. The company stands to be a major beneficiary of Facebook's ramped-up technology investments. 

Now what

Nvidia finds itself in a position to profit from the battle being waged among the tech titans. With Apple's (AAPL 1.37%) privacy-focused initiatives weakening its ad-targeting abilities, Facebook has little choice but to seek new ways to reinforce its digital advertising business.

CEO Mark Zuckerberg is also adamant about the game-changing potential of the metaverse, an immersive, virtual reality-driven experience that he hopes to help build. Zuckerberg wants to position Facebook as a dominant player within the metaverse as a means to reduce its dependence on mobile platforms controlled by the likes of Apple and Alphabet's Google.

Facebook sees strengthening its AI capabilities as vital to both of these key aspects of its long-term competitive strategy. In turn, Nvidia's deep learning expertise and high-performance hardware and software could accelerate Facebook's progress toward achieving its AI-powered strategic objectives -- while fueling its own growth along the way.

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 its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, and Nvidia. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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