Is the artificial intelligence (AI) bubble about to burst? Some people think so. And if that does happen, leading AI companies, such as Nvidia (NASDAQ: NVDA), may experience sharp dips. However, there are also reasons to remain bullish on AI, and Nvidia’s financial update and conference call for the first quarter of its fiscal year 2027, ending on April 26, highlighted this. Let’s look into some reasons it is not too late to invest in Nvidia.
The proof is in the pudding
Nvidia released its earnings update on May 20. The market was not satisfied, despite the company’s revenue and earnings beat and strong second-quarter guidance. However, the chipmaker’s financial results continue to show clear evidence of sustained, and even accelerating demand, for its products.
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Consider this: Nvidia’s revenue has now grown sequentially for 14 quarters straight. That’s nearly four years of increased spending on AI infrastructure quarter after quarter, with not a single dip, and, notably, Nvidia’s revenue grew sequentially by $13.5 billion this time around, a record for the company. Based on Nvidia’s guidance, sequential growth will continue for at least one more quarter.
That is an incredibly impressive accomplishment for a company of this size, especially in the otherwise cyclical semiconductor industry. We can also expect things to keep going for at least the next few years. Here is why. According to Nvidia’s CFO, Colette Kress, analysts are projecting $1 trillion in hyperscale capex spending by 2027. And AI infrastructure spending could rise to between $3 trillion and $4 trillion by the end of the decade, still according to Kress.
We have plenty of evidence from other companies, including the hyperscalers, that AI infrastructure spending is on a solid northbound trajectory. Take Alphabet, one of the leading cloud computing providers. The company expects to spend between $180 billion and $190 billion in capex this year, largely on AI infrastructure. Management also said this number should accelerate significantly in 2027.
The three major cloud computing leaders, Alphabet, Microsoft, and Amazon, are pouring similar amounts into capex this year. Microsoft is projecting $190 billion, while Amazon said it would do $200 billion. If Alphabet says its spending will spike next year, we can reasonably expect something similar from its two biggest competitors. So, Nvidia’s projections, even if a bit optimistic, don’t seem out of the realm of possibility.