Microsoft discussed plans to increase capital spending in the new fiscal year while indicating that its investment in AI is yielding positive results.
On Wednesday, Rose by 12.8% after Microsoft Corp. announced plans to increase capital spending in the new fiscal year. This announcement indicated that Microsoft is continuing to invest heavily in artificial intelligence infrastructure and seeing positive returns on their investment.
Nvidia’s stock also saw its best daily performance since February 22, with a 16.4% increase, adding $327 billion in market capitalization on Wednesday, making it the largest one-day increase for a U.S. company. The PHLX Semiconductor Index surged 7% on Wednesday, marking its best one-day performance since November 10, 2022. This comes after the index had dropped about 17% from its high earlier in July.
Analysts believe that Microsoft’s investment in AI infrastructure could bring relief, particularly in light of Meta’s recent decision not to raise its capital expenditure forecasts. Meta has since revised its capital-expenditure forecast for the full year, expecting significant growth in capital expenditures in 2025 to support AI research and product development.
Nvidia’s shares saw an additional 2% increase in Wednesday’s extended session, and it was noted that Microsoft's capital expenditures could greatly benefit Nvidia shareholders after the recent sell-off.
Furthermore, Microsoft’s expressed plans for an acceleration in Azure cloud-computing revenue growth during the second half of the fiscal year are attributed to the company’s investment in AI infrastructure, indicating that AI spending is delivering positive returns when it comes to Azure.
The positive outlook on spending from Microsoft had a favorable impact on Nvidia and other semiconductor companies, especially amid concerns on Wall Street about the sustainability of investments and the returns on investment from AI.
Microsoft also provided insight into AI's role in driving cost savings for the company, debunking concerns that AI does not generate a return, as stated by Evercore ISI analyst, Mark Lipacis.
Additionally, projections for positive results from Nvidia, Broadcom Inc., and Marvell Technology Inc. for the second quarter sparked positive implications. It was anticipated that capital-expense growth rates for hyperscale cloud providers would increase in the second half of the year, translating to an inflection in data center/AI growth rates for semiconductor coverage universe.
Nvidia's 13% rally on Wednesday followed a recent selloff, leading Morgan Stanley’s Joseph Moore to reinstate Nvidia shares as a top pick, expressing confidence that concerns regarding capital spending budgets and competitive fears will diminish over time.
Finally, other notable gainers in the semiconductor sector included shares of Broadcom, up 12%, Super Micro Computer Inc., up 5.3%, and Micron Technology Inc., up 7.1%, all of which had been under recent pressure alongside chip stocks more broadly.
Post a Comment