Anticipation: Nvidia Stands to Profit Most from Microsoft's Estimated $80 Billion Investment in Artificial Intelligence
Microsoft, represented by the ticker symbol MSFT (0.24%), made waves last week with an announcement to pump an impressive $80 billion into building global data centers. Half of this investment will be poured into the United States alone. This staggering amount surpasses the GDP of several nations, such as Croatia and Lithuania.
The primary focus of these data centers is to train AI models and handle AI and cloud-based applications. Microsoft's Azure cloud has seen significant growth, with a 33% year-over-year increase in revenue from its AI services in the last quarter. Demand for its AI services has outpaced its capacity, leading to potential growth if capacity constraints weren't a factor.
Microsoft's leases for yet-to-be-constructed data centers totaled $108.7 billion, set to commence between fiscal 2025 and 2030. Their lease terms range from one to 20 years. This indicates a multi-year data center investment plan.
Nvidia Poised to Reap the Benefits
Microsoft's investment in data centers implies potential growth for tech giant Nvidia (NVDA 2.98%). While not all of the $80 billion will be allocated for Nvidia's specialties, such as GPUs and AI accelerator chips, a considerable portion will.
In fiscal 2024, Microsoft spent $44.5 billion on capital expenditures, with over half allocated to assets with long practical lives, while the other half went towards CPU and GPU servers. Nvidia, a significant supplier of GPUs, was Microsoft's largest customer, purchasing over 485,000 GPUs in 2024, double that of its second-largest client, Meta Platforms.
Microsoft's finance leases for future data centers suggest that data center investments will continue. With half of Microsoft's capex allocated to long-life assets like leases, less than half of these leases are expected to commence this year.
Nvidia's continued dominance in the GPU market (around 90% market share) and its CUDA software platform, which enables developers to program its chips for various tasks, cement its position as the AI infrastructure king. Competitors like Advanced Micro Devices trail behind, and Nvidia looks set to continue as the primary AI infrastructure winner.
Custom AI chips from companies like Broadcom and Marvell Technology may pose a challenge, as they excel in specific tasks. However, these chips are customer-specific, and massive AI infrastructure projects still rely heavily on Nvidia and its GPUs for scalability, ensuring its market share remains substantial.
Nvidia's Stock: An Attractive Investment
Nvidia's strong position in AI infrastructure, coupled with Microsoft's substantial data center expenditure, continues to justify a bullish outlook on Nvidia's stock. The company's forward price-to-earnings ratio (P/E) of approximately 31.4 based on 2025 analyst estimates, and a PEG of 0.98, position them as an attractive value in the tech sector.
Investors seeking exposure to AI infrastructure growth may find Nvidia a compelling investment opportunity.
The announcement of Microsoft's $80 billion investment in global data centers, with a significant portion going towards artificial intelligence and cloud-based applications, bodes well for tech giant Nvidia. Nvidia, known for its GPUs and AI accelerator chips, is expected to benefit significantly from this investment.
Microsoft's leases for future data centers total a whopping $108.7 billion, with a focus on long-term assets, further emphasizing its commitment to data center investment. Given Nvidia's position as Microsoft's largest GPU customer, this investment could significantly boost Nvidia's sales.
With a forward price-to-earnings ratio (P/E) of around 31.4 based on 2025 analyst estimates and a PEG ratio of 0.98, Nvidia's stock is considered an attractive investment opportunity in the tech sector. The company's strong position in AI infrastructure, coupled with Microsoft's data center expenditure, supports this bullish outlook.
Looking towards 2025, the biggest data center expansion expansion in tech history could potentially lead to the highest demand for AI infrastructure, making Nvidia's stock an enticing prospect for investors seeking exposure to AI growth.
