Microsoft (MSFT) and Google Parent the alphabet ( GOOGL ) late Thursday announced increased spending on data center hardware to support artificial intelligence initiatives. The news sent AI stocks higher on Friday, including the top names Nvidia (NVDA) and Super Microcomputer (SMCI).
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earlier this week, Meta platforms (META) and Tesla ( TSLA ) also announced higher AI-related capital expenditures. The news cheered AI stocks, especially semiconductor stocks.
“AI spending has fueled a great deal of optimism around the semi complex and we see no reason to believe this dynamic changes in the near term,” Wedbush Securities analyst Matt Bryson said in a client note. comes.”
Increased spending on AI infrastructure has positive implications for many chipmakers, Bryson said. Among them are Nvidia, AMD (AMD), Broadcom (AVGO) and Marvell Technology (MRVL), he said.
Long-term tailwind for AI stocks
BofA Securities analyst Vivek Arya believes the AI megatrend will provide a long-term tailwind for semiconductor stocks exposed to the market.
“In our view, the upfront AI build-out cycle is at least 3-4 years (2023-2023), with the most favorable chip stock upside potential during the first three years (2023-2025),” Arya said in a client note. -2027e) can last.”
He sees five semiconductor stocks as key beneficiaries of increased investment in AI and cloud data centers. Those AI stocks are: Nvidia, its top pick, plus Broadcom, Marvell, AMD and the memory chip maker Micron Technology (MU).
Super Micro stock rises on news
In a client note, JPMorgan analyst Samak Chatterjee said rising AI infrastructure spending is a plus for server makers. Dell Technologies (DELL) and Super Microcomputer. The news is also positive for networking gear firms. Arista Networks (a trap), integrated (COHR) and Lumentum (LITE).
Google reported investments of $12 billion in the first quarter, up 91% year-over-year, and above the consensus estimate of $9.8 billion. Google expects capex to be kept at or above Q1 levels for the rest of the year. This suggests investment of at least $48 billion for 2024, versus the consensus estimate of $41.6 billion.
Microsoft reported capital expenditures of $11 billion in the first quarter, up 66 percent year-over-year, but slightly below the consensus estimate of $11.3 billion. However, Microsoft expects its capex to grow materially on a sequential basis through cloud and AI investments.
In the stock market today, Nvidia stock closed up 6.2 percent at 877.35. AMD rose 2.4% to 157.40. Broadcom rose 3.8 percent to 1,344.07. Marvell climbed 3.2% to 69.62. And Micron was up 2.9% at 114.84.
Among other AI stocks, data center specialist Super Micro rose 8.9 percent to 857.44. Arista Networks ended the day flat at 264.70 and Coherent rose 4.1 percent to 55.06. Lumentum rose 3.4% to 43.42.
Follow Patrick Seitz at X, first on Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.
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