Great News for Nvidia? Amazon, Google, Microsoft Spending Big On AI and Cloud

Amazon.Com Inc AMZN, Microsoft Corp MSFT, and Google parent Alphabet Inc GOOG GOOGL are in no mood to compromise in terms of their capital spending to build up capacity as the generative artificial intelligence war heats up. 

The leading cloud computing groups have boosted investment in computing infrastructure over the past few years. 

Previously, analysts have voiced $1 trillion in AI-driven opportunity for Nvidia Corp NVDA, which is on the front line supplying the GPU and chips. 

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Capital spending surged to an aggregate $42 billion in the three months to September 2023, up by 20% year-on-year. That figure marked a 10% growth from the quarter to June, Financial Times reports.

Analysts expect the pace of cloud-related spending to accelerate next year. 

In October, executives from the companies disclosed earmarking a significant portion of the capital spending towards the generative AI systems that consume vast amounts of computing power and data-crunching. 

Amazon CEO Andy Jassy predicted that generative AI would drive "tens of billions in revenues." 

Bank of America analysts project that these companies will increase their cloud-related capital expenditures by 22% in 2024 to $116 billion, following a 20% increase to $84 billion in 2022. This growth comes after a revised forecast for 2023, now expecting a 14% increase rather than no growth.

Microsoft is leading the investment surge to support AI workloads and its cloud business, with BofA's Justin Post noting that all three companies are investing in anticipation of future revenues. The decrease in Amazon's third-quarter investments reflects a reduction in e-commerce spending, with the company announcing a shift towards cloud investment.

Microsoft has secured an exclusive deal with OpenAI and integrated generative AI into its software products, potentially increasing customer costs by up to 83%. 

However, analysts caution that focusing on capital-intensive AI and cloud services could pressure profit margins. 

Price Action: NVDA shares traded higher by 0.85% at $453.72 premarket on the last check Monday.