Nvidia Stock Investors Just Got the Best News of 2025 (So Far) From Meta Platforms, Amazon, and Microsoft
After a relentless two-year run, Nvidia stock is taking a breather.
Fears regarding U.S. trade restrictions and a perceived slowing in AI spending have the stock trading lower.
Nvidia's valuation is trading near a three-year low and looks increasingly attractive.
The past few years have been a whirlwind for Nvidia (NASDAQ: NVDA) investors. The onset of the artificial intelligence (AI) revolution led to scorching demand for the graphics processing units (GPUs) that make AI possible. As the leading provider of these advanced chips, Nvidia has been one of the undisputed beneficiaries, with its stock growing more than eightfold in the two years heading into 2025.
In recent months, however, the narrative has turn turned decidedly pessimistic. The combination of U.S. export restrictions and concerns about slowing of the AI spending boom has weighed on Nvidia stock, which is down roughly 25% from its peak (as of this writing).
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However, commentary from three of the company's biggest customers provided much-needed good news for Nvidia investors.
The demand for data centers and servers with the computational horsepower needed for AI fueled a big run-up in capex spending by big tech. This spending helped fuel massive sales increases for Nvidia, as its data center segment generated six consecutive quarters of triple-digit year-over-year growth. However, numerous reports suggested that some of Nvidia's biggest customers were scaling back on data center spending, which sent the stock plunging. But the devil's in the details, and it turns out the sky is not falling after all.
When Microsoft (NASDAQ: MSFT) released the financial report for its fiscal 2025 third quarter (ended March 31), the results were surprisingly robust and driven by strong demand for AI. The highlight was Azure Cloud, which grew 33% year over year and accelerated from 31% growth in Q2. Perhaps more impressive was the revelation that 16% points of that growth was related to AI services, up from 13% points in Q2.
CEO Satya Nadella downplayed the reports of a slowdown in data center spending, noting this was merely the normal ebb and flow of regional data center planning. "We've always been making adjustments to build, lease, what pace we build, all through the last 10-15 years," Nadella said. He went on to say the company wants to ensure that the regional data center build-outs match the demand. They don't want to be "upside down," having too much capacity in one region and not enough in another.
There were similar concerns of a slowdown in data center spending for Amazon (NASDAQ: AMZN). Kevin Miller, Amazon's vice president of global data centers, refuted the reports. "There's been really no significant change," he noted. "We continue to see very strong demand, and we're looking both in the next couple of years as well as long term and seeing the numbers only going up."
When Meta Platforms (NASDAQ: META) reported its first-quarter results, the company made a surprise announcement that turned heads. The company revealed plans to increase its 2025 capital expenditures (capex) spending to $68 billion at the midpoint of its guidance, up from its previous forecast of about $62.5 billion. The company said, "This updated outlook reflects additional data center investments to support our artificial intelligence efforts, as well as an increase in the expected cost of infrastructure hardware."
As the leading provider of GPUs used to power AI in data centers, Nvidia is poised to benefit from the ongoing data center build-out. This will support the ongoing and accelerating adoption of AI.
Lest there be any doubt, the three aforementioned companies are among the biggest players in AI and are among Nvidia's biggest customers. While the chipmaker has kept the exact order close to the vest, analysts with Bloomberg and Barclays Research suggest that Nvidia's four biggest customers -- responsible for nearly 53% of its revenue -- are:
Microsoft: 15%
Meta Platforms: 14%
Alphabet: 12%
Amazon: 11%
Recent commentary from several of these tech stalwarts refutes the contention that spending on data centers and AI is slowing.
It seems clear that the AI revolution is alive and well, but there are still challenges ahead for Nvidia. The tariff situation remains a wild card and is subject to change from day to day. If the tariffs imposed by the Trump administration linger, chip prices could climb, and Nvidia's results could suffer.
Additionally, some investors are still wary of the future adoption of AI and how it will impact the company's future growth. This negativity has persisted, despite evidence to the contrary.
However, for investors with a long-term outlook, Nvidia looks increasingly compelling. The stock is currently selling for 39 times trailing-12-month earnings, with the multiple near its lowest point in over three years. Furthermore, its forward price-to-earnings ratio of 26 is an attractive price to pay for a company powering the AI revolution.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Barclays Plc and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Stock Investors Just Got the Best News of 2025 (So Far) From Meta Platforms, Amazon, and Microsoft was originally published by The Motley Fool
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