The Artificial Intelligence (AI) Infrastructure Stock That Hyperscalers Are Fighting Over for 2026
Key Points
Hyperscalers are investing heavily in new data centers to meet the growing demand for AI.
CEO Jensen Huang sees the buildout of more AI applications driving more demand for his company's technology.
Nvidia earns high margins on revenue, as there is currently no substitute for the raw horsepower of its GPUs.
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The growth of artificial intelligence (AI) requires massive investment in computing power and data centers. Leading cloud providers, or hyperscalers, continue to see demand for AI cloud services outpacing supply, and this is good news for Nvidia (NASDAQ: NVDA).
Top hyperscalers (Amazon, Microsoft, and Alphabet's Google) spent $305 billion on capital expenditures in 2025, and that is expected to grow significantly in 2026. Spending on chips and computing systems accounts for about half of data center spending, meaning the biggest technology companies are fighting for Nvidia's graphics processing units (GPUs) -- the benchmark chip for AI.
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Image source: Nvidia.
Explosive demand for Nvidia
Nvidia's data center revenue grew 66% year over year in its fiscal third quarter last year, reaching $51 billion and accounting for 89% of its total business. Analysts expect the company's total revenue to increase 67% year over year in the fiscal fourth quarter, according to Yahoo! Finance.
CEO Jensen Huang said, "We've entered the virtuous cycle of AI." More companies are building AI models and agents, driving greater demand for chips and compute capacity in data centers. Nvidia made a deal with OpenAI last year, which has over 800 million ChatGPT users, to deploy at least 10 gigawatts worth of AI data centers powered by Nvidia's technology. This will support OpenAI's eventual use of millions of GPUs, and it's apparent by their level of spending that the top hyperscalers are preparing for the same large-scale deployment of more chips over the long term.
All the top cloud providers are among the first to receive Nvidia's new chip generations each year. Nvidia's upcoming Rubin chips will provide even better AI performance over the previous Blackwell generation. This pace of innovation gives hyperscalers even more reason to keep investing in new data center capacity to deploy the most powerful chips available.
What this means for investors
The growth opportunity remains quite large for Nvidia, yet its stock price doesn't fully reflect the company's long-term potential. The stock's forward price-to-earnings ratio (currently around 24) is less than the company's expected earnings growth, as analysts anticipate 57% earnings growth this year and 37% annualized over the next few years. This is usually an indicator that a growth stock is undervalued.
That said, there's a reason investors are assigning a relatively modest multiple. Competition in AI chips is intensifying, with many top cloud providers using customized chips to reduce costs. But it's clear Nvidia is still the one all the big tech companies are fighting over, as noted by Nvidia's strong revenue growth and high profit margin. Nvidia earned $99 billion in profit over the last four quarters, representing a 53% margin on revenue.
Still, Nvidia's growth shows that it is in a solid competitive position. There's currently no substitute for the general-purpose computing power of GPUs, which can be used for a wide range of AI applications. At this valuation, Nvidia offers a favorable risk-to-reward proposition for investors.
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John Ballard has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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