TLDR
- Nvidia stock surged nearly 8% after CEO Jensen Huang defended the tech industry’s massive AI spending as sustainable and necessary
- Major tech companies including Meta, Amazon, Google, and Microsoft could spend up to $660 billion on AI infrastructure this year
- Huang called the current moment “the largest infrastructure buildout in human history” driven by exceptional demand for computing power
- Even six-year-old Nvidia chips like the A100 are fully rented, showing sustained demand for AI computing capabilities
- Companies are investing heavily because they expect cash flows to rise as AI products generate profits and revenue grows
Nvidia shares jumped nearly 8% Friday after CEO Jensen Huang told CNBC that the tech industry’s exploding AI spending is both justified and sustainable.
Huang’s remarks came at a crucial time. His biggest customers just reported earnings. Meta, Amazon, Google, and Microsoft plan to dramatically increase their AI infrastructure budgets.
Together, these hyperscalers could spend $660 billion on capital expenditures this year. Much of that money will go toward buying Nvidia chips.
Wall Street had a mixed reaction to the spending surge. Meta and Alphabet saw their stocks rise. Amazon and Microsoft got punished.
But Huang pushed back on any concerns. He described the situation as “the largest infrastructure buildout in human history.”
The CEO’s confidence rests on a simple formula. Companies are spending more today because they expect to earn more tomorrow.
“The reason for that is because all of these companies’ cash flows are going to start rising,” Huang explained.
He backed up his argument with real-world examples of how companies are using AI right now.
Real Applications Driving Demand
Meta is upgrading its recommendation systems from older CPU-based models to generative AI and autonomous agents. Amazon Web Services is using Nvidia-powered AI to improve product recommendations.
Microsoft is deploying the technology to enhance its enterprise software. These aren’t theoretical use cases. They’re happening now.
Huang also highlighted AI labs OpenAI and Anthropic. Both companies rely on Nvidia chips through cloud providers. Nvidia invested $10 billion in Anthropic last year.
“Anthropic is making great money. Open AI is making great money,” Huang said. “If they could have twice as much compute, the revenues would go up four times as much.”
Sustained Chip Demand
Perhaps most telling was Huang’s revelation about older hardware. Even Nvidia chips sold six years ago are fully rented.
The A100 chips are still in high demand. This shows the AI boom isn’t just hype. Companies are actually using the computing power they’re buying.
“To the extent that people continue to pay for the AI and the AI companies are able to generate a profit from that, they’re going to keep on doubling, doubling, doubling, doubling,” Huang said.
Wall Street analysts remain bullish on Nvidia. The stock has a Strong Buy consensus rating based on 37 Buys, one Hold, and one Sell assigned in the past three months.
The average price target sits at $260.06 per share. That implies 40.3% upside potential from current levels.
Huang’s comments addressed growing investor concerns about whether AI spending levels are sustainable. His answer was clear. As long as AI remains profitable, demand for computing power will keep growing fast.
The CEO pointed to “sky high” demand for computing power that companies can directly monetize. This demand is driving unprecedented infrastructure investment across the tech sector.
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