Nvidia (NVDA 1.53%) has been a cornerstone of the artificial intelligence (AI) trade since OpenAI introduced ChatGPT in late 2022. Shares have advanced 1,180% since early 2023, and most Wall Street analysts still think the stock is undervalued. The median target price of $250 per share implies 33% upside from the current share price of $187.
On that note, investors just got some good news from Alphabet, Amazon, Meta Platforms, and Microsoft that hints at strong financial results from Nvidia in the year ahead. Here are the important details.
Image source: Nvidia.
Nvidia is more than a chipmaker
Nvidia graphics processing units (GPUs) accelerate complex data center tasks like artificial intelligence training and inference. The company holds more than 80% market share in AI accelerators, and many analysts think Nvidia will maintain its dominant position due to its full-stack strategy, meaning the company develops adjacent hardware and software.
To elaborate, while Nvidia GPUs consistently outperform competing chips, the company is truly formidable because it offers a turnkey solution for AI infrastructure comprising CPUs, networking, and software tools. Indeed, networking revenue increased 162% in the most recent quarter, and its proprietary CUDA software is the industry standard in developing GPU-accelerated applications.
So what? Nvidia captures a substantial percentage of data center capital expenditures (capex) due to its full-stack strategy -- AllianceBernstein estimates the company pockets 30% of total AI data center spending as profit. And recent projections from several hyperscalers (i.e., companies with massive data center footprints) indicate that Wall Street woefully underestimated how much money will be spent on AI infrastructure this year.
NASDAQ: NVDA
Key Data Points
Wall Street likely underestimated AI spending in 2026
Wall Street analysts have consistently underestimated AI spending in recent years. The consensus forecast said AI hyperscaler capex would increase 19% in 2024, but it actually soared 54%. Similarly, the consensus forecast said AI hyperscaler capex would increase 22% in 2025, but it actually soared 64%, according to Goldman Sachs.
That pattern is repeating in 2026. While the consensus estimate said AI hyperscaler capex would jump 19% this year, recent commentary from Alphabet, Amazon, Meta Platforms, and Microsoft suggests much faster growth.
- Alphabet says capex will total $180 billion at the midpoint in 2026, up 98% from $91 billion in 2025. Also, it's worth noting that Alphabet initially estimated $75 billion in capex last year, but exceeded that figure by a wide margin. In the fourth quarter, cloud revenue backlog more than doubled on strong demand for Gemini models and platform services.
- Amazon says capex will total $200 billion in 2026, up 56% from $128 billion in 2025. Most of that total will be directed at AI infrastructure in the cloud computing unit Amazon Web Services (AWS). "Customers really want AWS for core and AI workloads," said CEO Andy Jassy. "We're monetizing capacity as fast as we can install it."
- Meta Platforms says capex will total $125 billion at the midpoint in 2026, up 74% from $72 billion in 2025. CEO Mark Zuckerberg said AI investments are driving meaningful growth across its social media platforms and ad business. Also, in the not too distant future, Meta hopes to develop a superintelligence system that can be integrated into wearables like augmented reality glasses.
- Microsoft says capex totaled $72 billion in the first two quarters of fiscal 2026, which ended in December, putting the company on pace to spend more than $140 billion in the fiscal year. That represents a 59% increase from $88 billion in fiscal 2025. CEO Satya Nadella said, "We will increase our AI capacity by over 80% this year and roughly double our total data center footprint over the next two years."
Here's the big picture: Wall Street initially estimated AI hyperscaler capex would increase 19% in 2026, but revised estimates suggest spending will increase 70% to roughly $650 billion. That is good news for Nvidia because the company is likely to capture a large percentage of that spending.
