Meta Platforms (META 2.51%) is on track to spend big on artificial intelligence (AI) infrastructure this year, which isn't surprising as the company is reaping the benefits of integrating AI into different areas of its business.
Meta management announced in January that it will increase its capital spending to a range of $115 billion to $135 billion in 2026, up from last year's outlay of $72.2 billion. The tech giant has joined the ranks of other major cloud computing companies poised to spend big on AI hardware this year.
Meta says that its increased capital investment will support its Superintelligence Labs division and core business operations. And now, the latest announcement from the hyperscaler suggests that Nvidia (NVDA 1.47%) will be a big winner from the company's increased outlay.
Let's look at the reasons why.
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Meta Platforms has expanded its Nvidia partnership
On Feb. 17, Meta and Nvidia announced that they are entering into a "multiyear, multigenerational strategic partnership" to build AI infrastructure. Meta will deploy Nvidia's Grace central processing units (CPUs), "millions of Nvidia Blackwell and Rubin GPUs," and Ethernet switches in its hyperscale data centers to support both AI training and inference applications.
NASDAQ: NVDA
Key Data Points
Meta CEO Mark Zuckerberg added that the company will be using Nvidia's upcoming Vera Rubin data center chips to power its personal superintelligence platform. This isn't surprising, as Nvidia claims that its Vera Rubin platform can reduce the cost of AI inference by tenfold and the number of graphics processing units (GPUs) needed to train models by fourfold.
Additionally, the power efficiency of Arm-based Grace CPUs has led Meta to go for the first-ever large-scale Grace-only deployment. All this is great news for Nvidia, which has entered 2026 with a solid order backlog that should lead to stronger growth in its data center business. Meta's announcement that it will purchase "millions" of chips from Nvidia is likely to boost its order book, setting the company up for potentially stronger growth in 2026.
It is worth noting that Nvidia's foundry partner, Taiwan Semiconductor Manufacturing, is already on track to significantly boost its manufacturing capacity in 2026. Nvidia, therefore, should be able to fulfill a nice chunk of its huge backlog and the new orders that it is receiving, leading to a stronger-than-anticipated spike in its revenue and earnings this year.
Stronger growth could lead to terrific upside
Analysts are forecasting a 53% increase in Nvidia's revenue in fiscal 2027, which has just begun, to $327 billion. What's more, its earnings are estimated to jump by 65% this year to $7.75 per share. Importantly, analysts increased their fiscal 2027 earnings estimate for Nvidia in recent weeks, and it won't be surprising to see this figure heading higher following Meta's announcement.
Data by YCharts.
Assuming Nvidia ends the current fiscal year with a bottom line of $7.80 per share and trades at 32 times earnings (in line with the tech-laden Nasdaq-100 index's earnings multiple), its stock price could jump to $247. That suggests potential gains of 32%, which is why buying this AI stock while it trades at an attractive 24 times forward earnings seems like the smart move, given the potential upside.
