Meta Platforms and Microsoft aren't slowing their spending on AI data centers, defying skeptics who have predicted a pullback. That's welcome news for Nvidia stock and other enterprise computer hardware firms.
Facebook parent Meta late Wednesday raised its 2025 capital expenditure forecast to $68 billion at the midpoint of its guidance range from its prior target of $62.5 billion.
The spending increase "reflects additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware," Meta said in a news release.
Meanwhile, Microsoft late Wednesday reported capex for the March quarter of $21.4 billion, vs. $22.6 billion in the December quarter. Microsoft said it plans to increase spending in the June quarter, its fiscal Q4. It is on pace for capex of more than $80 billion in fiscal 2025.
Microsoft executives noted that the company is facing AI capacity constraints, which they expect to continue beyond the current quarter.
Last week, Google parent Alphabet reaffirmed its ambitious AI buildout plans with $75 billion capex guidance for the year.
Wall Street analysts said the reports from those hyperscale cloud computing service providers bodes well for data center infrastructure firms.
"The combo of Microsoft saying demand exceeds supply for next quarter or two and Meta boosting capex by 10%-plus vs. prior to me says cloud capex spending next year is not going down," Mizuho Securities trading-desk analyst Jordan Klein said in a client note. "It will grow again and creates a pretty good setup for Nvidia, Broadcom, TSMC first and foremost."
Nvidia, Other Tech Providers Advance
On the stock market today, Nvidia stock climbed 2.5% to close at 111.61. Fellow chipmakers Broadcom and TSMC also rose.
Other tech hardware firms advancing on Thursday included AI server makers Dell Technologies, Hewlett Packard Enterprise and Super Micro Computer. Vertiv, a provider of power and cooling systems for data centers, popped more than 8%.
Another beneficiary of the AI data center buildout is Arista Networks, a provider of cloud computer networking gear. Arista shares surged more than 6% on Thursday.
Meta and Microsoft account for more than 40% of Arista's sales, Evercore ISI analyst Amit Daryanani said in a report. He noted that Vertiv also has high exposure to Meta and Microsoft.
Microsoft's fiscal Q3 report put to rest concerns about the company pausing its AI data center buildout, Raymond James analyst Andrew Marok said in a report.
"Worries around AI demand following the reports of data center lease cancellations were calmed," Marok said. "AI demand remains robust. So much so that the timeline for capacity/demand breakeven was pushed into early fiscal 2026 despite as-expected capacity growth."
In the March quarter, Microsoft opened data centers in 10 countries across four continents, Chief Executive Satya Nadella said on a conference call with analysts.
Supermicro Warning An Outlier
The March-quarter reports from Google, Meta and Microsoft are most favorable for cloud tech providers Arista, Celestica, Amphenol and Coherent, JPMorgan analyst Samik Chatterjee said in a client note.
"Importantly, the raised full-year outlook from Meta, the reiterated fiscal second-half outlook from Microsoft, and the reiterated full-year outlook from Google implies that the solid investment momentum is continuing through the year," Chatterjee said.
The reports from Meta and Microsoft came a day after Super Micro Computer, better known as Supermicro, warned that its March-quarter results would be well below its guidance. Most analysts said Supermicro's issues are company-specific and do not reflect a change in AI data center demand.
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