Amazon (AMZN 1.28%) stock tanked after its fourth-quarter earnings report last week, when the tech company revealed that it plans to spend $200 billion on building out its artificial intelligence (AI) platform this year. But if the market wasn't enthused about Amazon itself, there was a silver lining for other stocks; namely, the companies that provide the infrastructure for the AI business.
Here's why Amazon's update is great news for Nvidia (NVDA 1.36%) investors.
Image source: Getty Images.
The chips that drive AI
It wasn't only Amazon that said it would hike AI capital expenditures (capex) this year; Microsoft, Alphabet, and Meta Platforms are also planning to increase spending in 2026. They are all competing in the AI race, and they all require Nvidia's products to stay competitive.
It's more than Nvidia's graphics processing units (GPUs), though. Nvidia has built up an ecosystem of interconnecting products that all work together, and its high-spending clients are already invested in these expensive systems. Nvidia's CUDA software, for example, is a software platform that simplifies AI development with its GPUs and expands its edge in the space. Data center sales have been driving high growth for Nvidia, with hyperscalers buying more products like its NVLink data center platform and the Quantum InfiniBand networking platform.
NASDAQ: NVDA
Key Data Points
CEO Jensen Huang gave an upbeat take on the capex buildout, and Nvidia stock rose even as Amazon and other hyperscaler stocks dropped. He told CNBC that the buildout is "appropriate and sustainable," because as soon as these companies invest, "their cash flow is going to start rising."
That's great news for all the hyperscalers, as well as Nvidia.
