For the last couple of years, megacap technology companies have dominated the artificial intelligence (AI) narrative.
Microsoft turned heads with its $10 billion investment in ChatGPT maker OpenAI. Amazon swiftly followed, pouring $8 billion into a competing platform called Anthropic. And then there's Alphabet, which just made its largest acquisition of all time -- a $32 billion purchase of cybersecurity firm Wiz. As smart investors know, cybersecurity has become a major use case in AI applications for Alphabet's cloud platform over the last two years.
While these billion-dollar deals are exciting, no company has benefited more from AI tailwinds than Nvidia (NVDA 1.56%). The company's graphics processing units (GPUs) are considered the gold standard for developing generative AI, and big tech just can't get enough.
With all of this said, one "Magnificent Seven" member that has been suspiciously quiet during the AI revolution is Apple. Sure, the company has released a new iPhone model and developed a tool integrated with OpenAI called Apple Intelligence. But so far, the company's foray into the AI realm has been underwhelming during an otherwise generationally exciting period for technology.
Well, that may have just changed. Despite its later-than-anticipated arrival to the AI party, reports are swirling around some major moves related to Apple that should excite Nvidia investors in particular. Let's dig in and assess why Nvidia looks poised to continue dominating the AI landscape for years to come.
NASDAQ: NVDA
Key Data Points
Apple is finally investing in AI infrastructure
Loop Capital Markets analyst Ananda Baruah recently released a client note in which he suggested that Apple is in the process of purchasing 250 Nvidia GB300 NVL72 servers for an estimated price of around $1 billion. While precise details around any new partnerships between Nvidia and Apple are still unfolding, I find the timing of Baruah's report interesting.
Earlier this month, Apple turned heads after the company announced its plan to invest $500 billion over the next four years into areas such as manufacturing and advanced silicon engineering. While Apple's press announcement for this infrastructure commitment did not specifically reference Nvidia, I see the company's decision around these investments as a bullish indicator for the chipmaker regardless. My reasoning for that is Apple's announcement echoes the plans of its megacap cohorts.
Earlier this year, Amazon, Microsoft, and Alphabet each announced plans to continue investing heavily into AI infrastructure. Collectively, these cloud hyperscalers are forecasting more than $250 billion of capital expenditure (capex) spend just for this year. When you layer the $65 billion that Meta Platforms plans to invest, AI infrastructure from big tech eclipses far more than $300 billion for 2025. Considering each of these companies leverage Nvidia's GPUs to train their AI models, I see the continued investments in infrastructure as a strong indicator for Nvidia's growth prospects.
What makes the rumors around Apple's server deal particularly exciting is that the GB300 NVL72 servers integrate Nvidia's next-generation GPU architecture, the Blackwell Ultra. Given the successful launch of the Blackwell series chipsets so far, I see the combination of rising capex from big tech plus Apple's ambitions in AI manufacturing as robust tailwinds for Nvidia over the next several years.
Image Source: Getty Images.
Is Nvidia stock a buy right now?
To be honest, it's hard to know with any real accuracy how much of the increased AI infrastructure spend I outlined above will be allocated toward Nvidia. With that said, the analyst forecasts below can still help paint a picture of what could be in store for Nvidia over the next few years as big tech ratchets up its capex spend.
NVDA Revenue Estimates for Current Fiscal Year data by YCharts
As the figures above indicate, Wall Street's consensus estimates suggest that Nvidia's revenue and earnings should continue accelerating over the next few years. This is an important dynamic to understand, as Nvidia plans on releasing even more GPU architectures over the next couple of years. In other words, despite the company's rapid spend across research and development (R&D), analysts are projecting even further revenue growth supported by rising profits. This could suggest that Wall Street is optimistic that Nvidia will continue dominating the AI infrastructure landscape -- holding onto its enviable pricing power over competitors and generating robust unit economics over the long run.
Despite the optimistic outlook, shares of Nvidia have gotten punished during the ongoing Nasdaq sell-off. I'll concede that ongoing uncertainty around tariffs, as well as some recent developments surrounding export controls in China are likely to bring some near-term headwinds to Nvidia stock. But the long-term outlook supported by continued investments in AI infrastructure has me bullish over the company's long-term picture.
NVDA PE Ratio (Forward) data by YCharts
Right now, Nvidia is trading for just 25 times forward earnings -- approximately half its level seen just a couple of months ago. In my eyes, long-term investors are currently presented with a rare opportunity to invest in AI's top darling at a historically cheap valuation.
