Shares of Nvidia (NVDA +8.01%) were sharply higher on Friday, climbing as much as 7.8%. As of 1:02 p.m. ET, the stock was still up 7.3%.
The catalyst that sent the artificial intelligence (AI) chipmaker higher was the results of one of its big tech colleagues, which bodes well for Nvidia's future.
Image source: Nvidia.
Chips ahoy
Amazon (AMZN 5.49%) released its fourth-quarter financial report after the market close on Thursday. While the results were robust, investors had some concerns. Amazon reported net sales that climbed 14% year over year to $213.4 billion, or up 12% in constant currency. This drove diluted earnings per share (EPS) up 4% to $1.95.
For context, analysts' consensus estimates called for revenue of $211.6 billion and EPS of $1.96, so while Amazon beat on the top line, its bottom-line results were roughly in line with expectations.
Investors were paying particularly close attention to the results of Amazon Web Services (AWS), and they were not disappointed. Revenue for the cloud segment increased 24% year over year to $35.6 billion, marking the third consecutive quarter of accelerating growth and its fastest growth rate in 13 quarters. AWS had a backlog of $244 billion, up 40% year over year and 22% sequentially, driven by strong demand for AI.
As such, CEO Andy Jassy announced plans to spend a record $200 billion on capital expenditures (capex) in 2026, an increase of 51%. The spending will be "predominantly" for AWS, as the company is "monetizing capacity as fast as we can install it."
NASDAQ: NVDA
Key Data Points
What does this have to do with Nvidia?
AWS and Nvidia have a long-running partnership, and while Amazon prefers its homegrown Graviton and Trainium processors, the bulk of its AI is still run on Nvidia graphics processing units (GPUs). At an investor event earlier this week, AWS chief Matt Garman revealed that Amazon is still using six-year-old Nvidia A100 chips, as demand continues to outpace supply. "We are actually sold out and have never retired an A100 server," he noted.
Moreover, Nvidia and AWS expanded their partnership late last year, deploying Nvidia's Blackwell GPUs, Spectrum-X Ethernet Switches, and NVLink interconnects.
These developments suggest that Nvidia will be on the receiving end of a significant amount of Amazon's capex budget, which bodes well for the chipmaker.
