As investors pour into artificial intelligence (AI) stocks, valuations have surged and plenty of money has been made along the way. One of the biggest winners of the recent AI boom has been Nvidia (NVDA 1.04%). In the past three years, the stock is up over 940%, meaning a $1,000 investment three years ago would be worth over $10,400 as of market close on Aug. 22.
With Nvidia's recent stock success, some investors may be concerned that they have missed the train. However, that's far from the case, and there's one reason why: Data center spending is still ramping up.
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Nvidia's recent success has come from its role in producing data center hardware, especially its graphics processing units (GPUs). In its latest fiscal quarter, data center revenue increased by 73% year over year and accounted for nearly 89% of its total revenue. This high growth could continue as four of the biggest global companies plan to up their capital expenditures (capex), with much of it aimed at data center infrastructure.
- Microsoft plans to spend around $80 billion this year to build out AI-enabled data centers.
- Amazon's capex for the year will be well over $110 billion.
- Meta's capex could be up to $72 billion this year.
- Alphabet recently raised its spending target for the year from $75 billion to $85 billion.
Of course, not all of this spending will be going into Nvidia's pockets, but it shows the huge scale of investments into AI data centers -- which Nvidia will benefit from.
