Why Nvidia Stock Bounded Higher Thursday

Danny Vena, The Motley Fool

Thu, May 1, 2025, 11:40 AM 3 min read

• Investors have been concerned that the adoption of artificial intelligence (AI) might be slowing.

• Developments from some of the biggest names in tech appear to contradict that view.

• Nvidia remains a compelling way to invest in AI.

Shares of Nvidia (NASDAQ: NVDA) charged sharply higher Thursday, climbing as much as 5.5%. As of 11:59 a.m. ET, the stock was still up 4.4%.

The catalysts that sent the artificial intelligence (AI) chipmaker higher were several developments that suggest strong demand for its processors will likely continue.

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Microsoft (NASDAQ: MSFT) released its fiscal 2025 third-quarter financial report after market close on Wednesday, and investors were pleasantly surprised by the robust results. Revenue of $70 billion climbed 13% year over year, while diluted earnings per share (EPS) of $3.46 jumped 18%. Analysts' consensus estimates were calling for revenue of $68.4 billion and EPS of $3.20, so Microsoft sailed past expectations.

The company credited accelerating demand for its cloud services and AI offerings for fueling its impressive growth. CEO Satya Nadella also downplayed reports that Microsoft was pulling back on data center spending, which would have been bad news for Nvidia.

Meta Platforms (NASDAQ: META) also made a splash. In the second quarter, revenue of $42.3 billion jumped 16%, fueling EPS of $6.43, which grew 37%. The figures were well ahead of Wall Street's expectations for revenue of $41.27 billion and EPS of $5.22.

The biggest surprise, however, was Meta's announcement that it is boosting its 2025 capital expenditures (capex) from its previous range of $60 billion to $65 billion to $64 billion to $72 billion. The company mentioned AI 78 times during its conference call, and some of that increased spending is earmarked for AI. As the leading supplier of the graphics processing units (GPUs) needed to support AI and data center growth, Nvidia stands to gain from this increased spending.

Finally, Nvidia CEO Jensen Huang stoked excitement with comments he made in an interview with The Wall Street Journal. He posited that every American company would need to adopt AI "factories" in order to remain competitive. These virtual factories are designed to continually create AI models for specific functions and will be the "engine" that supports AI development, according to Huang.

Investors have been concerned that the pace of AI adoption might be slowing, but this trio of developments suggests the road ahead is long. Furthermore, at less than 26 times forward sales, Nvidia represents an attractive way to profit from the AI revolution.