Tech Giants Aim for $300 Billion Investment in AI by 2025

Artificial intelligence (AI) is being hailed as one of the most transformative technologies in recent memory. It has the capability to rapidly produce text, images, videos, and computer code, which can greatly enhance productivity across various global businesses.

While AI technology is still emerging, analysts on Wall Street predict that it could contribute between $7 trillion and $200 trillion to the global economy over the next ten years. This potential has sparked fierce competition among major tech firms, each striving to dominate the AI landscape. Consequently, these companies are investing heavily in data centers and chip technology.

According to a report from Morgan Stanley, four major tech players are projected to spend a staggering total of $300 billion on capital expenditures (capex) in 2025, primarily fueled by AI development. Nvidia is expected to be a significant beneficiary of this spending, thanks to its leadership in providing advanced chips necessary for AI innovation.

Current Spending Trends Among Tech Giants

To create more intelligent AI solutions, developers are focused on deploying sophisticated large language models (LLMs). This demands extensive data resources and substantial processing power, leading to significant costs. Most companies, apart from well-funded AI startups like OpenAI and Anthropic, usually lack the resources to construct and manage their own data centers. As a result, many choose to rent computing capacity from established tech giants developing robust infrastructure.

Here’s a breakdown of how major tech firms are currently allocating their budgets toward capital expenditures that include AI infrastructure:

• Microsoft reported spending $20 billion in capex during its fiscal first quarter of 2025, following a total of $55.7 billion in fiscal 2024.
• Amazon is projected to spend $75 billion in the calendar year 2024 to support AI initiatives.
• Alphabet expects to invest over $50 billion in capex by the close of 2024.
• Meta Platforms aims to spend up to $40 billion on capex in 2024.
• Oracle plans for a capex budget of $13.8 billion in its fiscal 2025 year, concluding in May.
• Tesla is estimated to allocate over $11 billion toward AI infrastructure in 2024 to enhance its self-driving software.

A key part of this spending is on chips. Nvidia’s H100 graphics processing units (GPUs) have become the preferred hardware for developing AI applications, capturing around 98% of the market share. Currently, Nvidia has begun distributing its new generation of GPUs, called Blackwell, which promise significant advancements in performance.

Growth Expectations for 2025 from Morgan Stanley

Morgan Stanley's analysis anticipates that the four tech leaders will collectively invest $300 billion in capex by 2025. The anticipated spending breakdown includes:

• Amazon: $96.4 billion
• Microsoft: $89.9 billion
• Alphabet: $62.6 billion
• Meta Platforms: $52.3 billion

These figures signify notable growth compared to their projected capex for 2024. While it's unclear how much of this expenditure will be specifically directed toward chip acquisition, forecasts indicate that Nvidia could ship as many as 800,000 units of the new Blackwell-based GB200 GPU in the first quarter of 2025 alone. Pricing estimates for these GPUs range from $60,000 to $100,000, which could potentially generate around $64 billion in revenue during that same time frame, based on an assumed average price of $80,000 per GPU.

This anticipated revenue is substantial compared to Nvidia's most recent quarterly earnings of $35 billion, signifying considerable room for growth. Reports indicate that Microsoft is already the leading buyer of the GB200 GPUs, while Oracle plans to utilize over 131,000 of these chips in its infrastructure. Given that the GB200 NVL72 system can execute AI tasks 30 times faster than the older H100 model, the demand is obviously high.

Nvidia Could See Major Gains from the Investment Surge

Considering the enormity of projected investments, Nvidia’s stock may stand to gain significantly. Despite its remarkable 700% increase over the last two years, many analysts suggest that the stock could still be undervalued.

For fiscal year 2025, Nvidia is expected to achieve revenues of around $129 billion. The company has also posted a strong profit margin, with an earnings per share (EPS) of $2.54 over the past four quarters, which equates to a price-to-earnings (P/E) ratio of 53.5 as of now—still below its ten-year average of 58.8.

Looking ahead, Wall Street projects a bright future for Nvidia, estimating an EPS of $4.43 on revenue of $195 billion for fiscal year 2026, which starts in February 2025. This would give Nvidia a forward P/E ratio of just 30.6. Essentially, for its stock to align with its historical average P/E ratio of 58.8, it would need to appreciate by over 90% in the coming year.

Additionally, Nvidia has a track record of outperforming Wall Street expectations, further hinting at potential upside for investors.

AI, Investment, Technology