If you want to know where a company's sales are heading, it's a good idea to follow what its key customers are saying about spending. In the case of Nvidia (NVDA 1.56%), that means looking at how hyperscaler cloud service providers like Amazon.com's Amazon Web Services, Alphabet's Google Cloud, and Microsoft's Azure are planning to spend money on AI and data centers and whether their plans are changing.
Spending on data centers remains robust
As data center equipment companies like Vertiv recently outlined, the pipeline of investment in data centers remains strong. The capital spending plans of the cloud service providers discussed above support that view.
NASDAQ: NVDA
Key Data Points
The good news is that they are planning significant increases in spending in 2025, and that's great news for Nvidia. For example, Amazon's spending on property and equipment was $83 billion in 2024,but when discussing plans for 2025 on its earnings call in February, CFO Brian Olsavsky said he expected the run rate of $26.3 billion to represent spending in 2025. This equates to $105.2 billion, and he said that "the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS."
Turning to Alphabet, which made $52.5 billion in capital spending in 2024, its CFO Anat Ashkenazi said it planned to spend $75 billion in 2025 and "increase our investments in capital expenditure for technical infrastructure, primarily for servers followed by data centers and networking."
It's a similar story at Microsoft, where Vice Chair and President Brad Smith told investors that Microsoft plans to spend $80 billion in its fiscal 2025 to build out AI-enabled data centers -- part of a trend in which Microsoft has doubled its data center capacity over the last three years.
Image source: Getty Images.
No let-up in demand for Nvidia
The trends in AI-related data center spending remain excellent. Unless these companies change their capital spending plans and management outlooks, Nvidia is likely set to have another great year.
