To The Moon

No Slowdown in Sight: Nvidia's AI Orders Remain Stable

$NVIDIA Corp(NVDA)$ 

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Since EY proactively resigned from its audit role for SMCI, speculation has grown: could this be due to certain undisclosed financial information within the company? This situation raises concerns about possible future involvement by the SEC, adding a layer of uncertainty. SMCI's stock price has plummeted by 40.7% over the past two days, contributing to a broader downward trend in the Philadelphia Semiconductor Index yesterday.

What we should pay close attention to is how AI trends are impacting the semiconductor upstream sector, and in turn, AI’s broader development. In the AI supply chain, different sectors contribute distinct functions—from the Cloud Service Provider vendors ordering parts, to mid-stream players like chip manufacturers, to downstream assemblers. To truly understand the trends in AI, we need to evaluate these supply chain dynamics comprehensively, especially as major tech companies release their financial reports.

Recently, tech giants like Amazon, Google, Meta and Microsoft have revealed their earnings. Results have been mixed: some sectors beat expectations, while others fell short. However, two key trends are clear: first, stock performance has largely remained stable, avoiding any significant drops. Second, these companies are universally increasing their capital expenditures (CapEx). Microsoft, for instance, raised its CapEx this quarter by 5.3 times to reach $20 billion, expecting up to $45 billion for the year. This hints that CapEx will likely grow further in 2025, suggesting revenue projections for the tech manufacturing sector should be higher than this year’s.

Meta, for example, has finally positioned itself in AI, launching products like the Meta smart glasses, which open up new market possibilities. Meta’s advertising revenue hit record highs this quarter, despite fewer e-commerce ads. Ultimately, these ad revenues drove Meta’s profits to a new high, and its CapEx for the year is also set to reach nearly $40 billion. This could drive Taiwan Semiconductor (TSMC) and other similar companies to new heights, with anticipated growth between 15% to 20% next year.

Among the tech giants, Google’s earnings were particularly impressive. Revenue from Google’s search business reached record levels, backed by strong cash flow, allowing for a substantial CapEx increase. The takeaway is that companies like NVIDIA’s downturn may just be a short-lived market reaction. The real focus should be on the next two quarters, where the performances of these companies will matter most.

Out of the major tech players—Apple, Microsoft, Meta, and Google—none have reduced CapEx; all have increased it. This implies that NVIDIA’s orders are likely stable, with major clients like Microsoft accounting for about 33% of its business, Google for around 31%, and Amazon aiming for over $75 billion in CapEx in 2025. With these 4 companies alone comprising over 90% of NVIDIA’s orders, and no indications of a slowdown in AI investment, NVIDIA’s expansion is expected to continue through every stage of the supply chain.

Ultimately, despite some concerns about AI overinvestment, the latest financial reports show that tech giants are not pulling back; instead, they’re increasing CapEx and confirming further investment in AI. This signals that funds allocated to AI development are not being wasted.

Major tech companies are steadily raising CapEx, indicating confidence in future AI growth and continued returns for the sector.

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