AI Spending Is Nearing $1 Trillion Annually. These 2 Stocks Are Most at Risk If It Slows.
Key PointsNvidia reported record revenue of $96.2 billion last quarter, with its data center business generating $89 billion of that total.
Artificial intelligence (AI) spending is projected to reach $1 trillion annually, leading to opportunities for chipmakers. Nvidia (NVDA) and Micron Technology (MU) have benefited significantly from this trend, with both companies posting record results. However, concerns are growing about the sustainability of this AI spending boom.
If tech giants reduce their AI investments, both companies could face challenges. Nvidia's growth is closely tied to the demand for AI infrastructure, but if major cloud providers delay projects or decide existing compute capacity suffices, orders for Nvidia's chips could decline. Moreover, Nvidia faces competition from AMD and other custom AI chip developers, as well as export restrictions that could limit its growth.
While investors are optimistic about Nvidia's stock, with most analysts rating it a buy or strong buy, the forward P/E ratio suggests moderate growth expectations. In contrast, Micron, a key player in the AI build-out due to its memory chips, reported record revenue in recent quarters. However, memory is a cyclical business, and if supply catches up with demand, prices could fall, potentially slowing AI spending.
Analysts also rate Micron as a buy, but its forward P/E is low, reflecting recognition of its cyclical nature. Both companies present investment opportunities tied to AI spending, but neither is immune to slowdowns in this spending trend.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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