Nvidia's stock extended its recent rally, climbing approximately 4% in early Monday trading to $192.40, following a significant 7.9% gain on Friday. This rebound, which ended a five-day losing streak, is primarily driven by renewed investor optimism surrounding sustained artificial intelligence infrastructure spending.
The rally is underpinned by massive capital expenditure forecasts from major technology firms. Alphabet (Google's parent company) and Amazon have announced hefty spending plans, contributing to an industry-wide projection of over $650 billion in capital expenditure for 2026. A substantial portion of this spending is earmarked for AI infrastructure, positioning Nvidia—a leading provider of AI accelerator chips—as a key beneficiary.
Analysts from William Blair noted that this "massive step-up in capex" is likely to greatly benefit merchant accelerator providers like Nvidia. Despite the rally, Nvidia shares remain only slightly positive for the year, facing headwinds including a rotation away from technology stocks, concerns over the sustainability of spending by AI firms like OpenAI, the rise of custom-designed AI chips, and increasing memory component costs.
A potential catalyst for further optimism is OpenAI's planned fundraising round of up to $100 billion. Analysts at DA Davidson, including Gil Luria, suggest that a successful fundraising effort could significantly improve sentiment toward companies in OpenAI's orbit, with Nvidia positioned for potential outperformance. This news also provided a lift to other chipmakers with OpenAI supply agreements, including Advanced Micro Devices (AMD) and Broadcom, which saw gains of 2.0% and 2.3% respectively.
Nvidia CEO Jensen Huang defended the scale of AI investment, calling the current wave the "largest infrastructure buildout in human history" and stating it is justified by "sky-high" demand for computing power. He cited examples of customers like Meta Platforms shifting to generative AI models and Amazon Web Services and Microsoft integrating AI into their services.
Nvidia is scheduled to report earnings on February 25, with analysts expecting earnings per share of $1.52 (a 70.79% year-over-year increase) and revenue of $65.56 billion (a 66.68% jump).
