Hyperscalers Increase Capex for AI in 2025, Boosting NVIDIA's Prospects

Recently, major hyperscalers such as Alphabet, Microsoft, Amazon.com, and Meta shared their third-quarter financial results and updates on capital expenditure (Capex) plans amidst a growing focus on artificial intelligence (AI). The figures they reported indicate significant growth, reflecting the ongoing investment boom in this sector.

According to Morgan Stanley analyst Brian Nowak, it is projected that hyperscalers will reach over $300 billion in Capex by 2025. This represents a 25% increase from 2024 and is nearly double the spending of 2023.

In this landscape, Amazon and Microsoft are anticipated to be the largest spenders, with estimated expenditures of $96.4 billion and $89.9 billion, respectively.

Nowak noted, "We now expect AMZN/GOOGL/META/MSFT to spend around $300 billion to $335 billion or more in 2025 and 2026 as they continue investing in multi-year generative AI and large language model opportunities." He emphasized the importance of transparent disclosure regarding new adoption rates, engagement levels, and revenue prospects that the four companies are currently observing and committing to.

The biggest winner in this scenario is NVIDIA, a company known for producing high-end AI chips that are critical for supporting this expanding infrastructure.

BofA Securities analyst Vivek Arya predicts that NVIDIA will capture over 75% of the AI accelerator market share through 2027. In comparison, other competitors like Advanced Micro Devices Inc. and Broadcom Inc. are expected to secure only mid-single digit market shares.

Arya also highlighted the tremendous potential growth of the AI accelerator market, projecting it will expand from approximately $45 billion in 2023 to around $280 billion by the end of 2027, with possibilities of exceeding $400 billion in subsequent years.

Hyperscalers, Capex, AI