Microsoft's Capex Boost May Send Nvidia Stock Soaring
Nvidia investors are likely to welcome news that Microsoft is ramping up its capital expenditure plans for fiscal 2027. According to Microsoft's chief financial officer Amy Hood, capex will grow year over year due to 'demand signals across our portfolio.' This indicates strong demand and insufficient computing power, which bodes well for Nvidia.
The AI hyperscalers believe that current data-center spending is not excessive, despite market skepticism. Instead of trimming their plans, they are continuing to increase capex. Microsoft's decision will benefit Nvidia as it is likely to purchase billions of dollars' worth of computing equipment from the chipmaker.
Nvidia has projected $1 trillion or more in data center capex from the AI hyperscalers in 2027, up from an estimated $650 billion in 2026. Despite this promising outlook, Nvidia's stock price is still undervalued, trading at 21.1 times forward earnings, which is equivalent to the S&P 500.
Wall Street analysts predict a 42% revenue growth for Nvidia during fiscal 2028, indicating huge growth next year. With its second-quarter earnings report on August 26 approaching, now may be an excellent time to invest in Nvidia shares while they are trading at a relatively cheap price tag.