Nvidia Stock Gains. Why Big Tech Earnings Can Spark a Rally.

Nvidia chips are the favored choice for training artificial-intelligence models. (Courtesy NVIDIA)

Nvidia stock was edging up early on Monday as the market looked ahead to earnings from the chip maker’s major customers. The signs are they will continue to spend heavily on Nvidia’s artificial-intelligence processors.

Nvidia shares were up 0.2% at $172.75 in early trading. Nvidia became the first company to ever close with a market capitalization over $4 trillion earlier this month and has been further boosted since then by news it can resume selling artificial-intelligence chips to Chinese customers.

The major driver for Nvidia stock over the coming weeks is likely to be earnings reports from technology companies, kicking off with Google-parent Alphabet on Wednesday.

The key metric from major cloud computing companies—the so-called “hyperscalers”— will be capital expenditure, largely representing spend on AI data centers filled with Nvidia processors. The biggest U.S. hyperscalers are collectively expected to spend $330 billion on capex in 2025, up 38% from the previous year, according to Daniel Morgan, a senior portfolio manager at Synovus Trust.

Alphabet has previously said its capex will come to around $75 billion this year. Any boost to that number will be good news for Nvidia.

“The ‘circular capex’ story at the top of the market remains intact with large tech firms investing in AI infrastructure driving demand for semis, software, and services,” wrote Morgan in a research note. “Furthermore, with the Trump administration receiving large investment commitments, one has to believe the boom will continue, at least in the near term.”

There are other positive signs for Nvidia as its customers continue to race to increase their AI capabilities. OpenAI CEO Sam Altman said in a social-media post Sunday that the ChatGPT developer would bring “well over” one million graphics-processing units online by the end of the year. OpenAI primarily uses Nvidia GPUs for training its AI systems.

Among other chip makers, Advanced Micro Devices was gaining 0.8% and Broadcom was rising 0.9% in morning trading.

Write to Adam Clark at adam.clark@barrons.com