Monitoring what industry participants are saying about the market is a sound strategy before making any stock purchases, especially in the case of Nvidia (NVDA). The main players in tech are heavily invested in artificial intelligence (AI) and the data centers that support its expansion.
Despite concerns and questions raised during recent revenue calls, there seems to be no significant decline in spending on data centers, which some expected would weaken the demand for AI. In fact, the signs suggest the opposite—demand for data centers appears to be either postponed or even picking up speed. Here are three points to consider.
- First quarter trading has been robust, and companies in the data center space are experiencing strong momentum.
- Anecdotal insights from industry insiders indicate that growth is accelerating, and the outlook is promising.
- Feedback from Hyperscalers and their capital expenditure plans points to sustained growth.
1. First Quarter Transactions
In the first quarter, there weren’t any issues with AI and data center investments. Google’s parent company, Alphabet, noted that AI products greatly exceeded Google Cloud’s revenue growth rate of 28% for the same period.
This sentiment was echoed by Microsoft‘s Chief Financial Officer, Amy Hood, during discussions with investors about their revenue outlook.
A noteworthy perspective comes from Nvidia’s partner, Vertiv, which provides essential digital infrastructure to data centers and telecommunications firms. This company reported a 10% increase in backlog to $7.9 billion in the first quarter, accompanied by a 1.4 book-to-billing ratio.
Nvent Electric, another player in this space providing electrical connections and protection solutions, is actively working to enhance its exposure to data centers. During a revenue call, CEO Beth Wozniak mentioned “significant double-digit growth” in data solutions, alongside mid-digit growth in other areas.
2. Growth is Accelerating
For Nvent, data center growth hasn’t shown any signs of slowing down. Wozniak has observed “increased demand” for their solutions, a sentiment reflected among mechanical and electrical contractors like Comfort Systems USA. They currently derive 37% of their revenue from data center work and semiconductor manufacturing plants. CFO William George remarked that the demand for electricians and plumbers to assist in building data centers remains strong.
Vertiv’s CEO Giordano Albertazzi mentioned that their project pipeline has seen growth over the past year.
3. Hyperscalers Continue to Spend
With the rapid growth in AI products, Alphabet’s CEO Sundar Pichai indicated that they are “undoubtedly investing” in AI, aiming for a capital investment of $75 billion by 2025.
Microsoft’s executives shared similar sentiments about their need for more data center space, despite concerns over spending forecasts that suggested a pullback in data center leases and project shutdowns.
However, CEO Satya Nadella noted the need to balance investments in data centers and workloads, highlighting that Azure is generally short on data center space.
Should You Consider Buying Nvidia Stocks?
While there could always be pullbacks in data center spending, there haven’t been indications of such from the mentioned companies so far.
This is good news for Nvidia investors, as the market will have time to adjust to the recent “liberation date” tariffs. Consequently, Nvidia and other data center stocks remain in focus.
