From Nasdaq:

Nvidia’s stock (NASDAQ: NVDA) has quadrupled over three years due to rapid expansion in the AI market. Companies like OpenAI, Microsoft, and Meta (NASDAQ: META) have been spending billions on Nvidia’s data center GPUs. Recently, Meta CEO Mark Zuckerberg said his company will install 350,000 of Nvidia’s H100 GPUs.

Nvidia’s revenue from data center chips hit $29.1 billion, or 75% of its top line in the first nine months of fiscal 2024. This lot guides Nvidia’s reliance on the AI market’s growth. Meta’s GPU purchases counter bearish claims by some analysts and could drive Nvidia’s stock higher.

Meta would not spend about $10 billion on Nvidia’s H100 GPUs if it thought the AI market was cooling off. The broader AI market could grow by 19% CAGR from 2023 to 2032, and generative AI niche at a faster 47.5% CAGR. Meta’s big GPU purchases give great potential to Nvidia’s stock growth.

Meta is still spending billions of dollars on the expansion of its Reality Labs segment, and its operating margin has reduced from 41% in 2019 to 25% in 2022. Its big GPU purchases from Nvidia could exacerbate that pressure. But Meta’s data center investments could potentially pay off in the long term.

Meta’s commitment to Nvidia indicates that the chipmaker will remain a linchpin of the AI market for years to come. It should boost Nvidia’s data center GPU sales and widen Meta’s own moat against other ad-driven tech giants such as Google. This big GPU purchase is great news for both companies.

It’s important to consider that Meta’s big purchase is good news for Nvidia, although the stock was not recommended by The Motley Fool’s Stock Advisor analyst team. Always do thorough research before investing.



Read more: Nvidia Is Selling $10 Billion in GPUs to This AI Tech Giant (Hint: It’s Not Microsoft)