The stronger the financial reports of tech giants, the higher NVIDIA's stock rises!

This week, tech giants in the US stock market have successively released better-than-expected earnings reports, with AI still being the hottest topic. Various executives have mentioned that "spending money on AI is necessary to make money," and their commitment to increasing expenses continues to boost the stock price of "shovel sellers" NVIDIA.

Amazon and Meta Platforms Platforms announced strong fourth-quarter performance on Thursday, with both companies' revenue and profits exceeding Wall Street expectations, leading to a 20% and 7% surge in Meta Platforms Platforms and Amazon stock prices respectively on Friday.

At the same time, NVIDIA's stock price also reached a new high, rising nearly 5% to $661. NVIDIA has accumulated a 37% increase so far this year.

Last year, with the rise of the AI boom, major giants competed to embed AI in key products, and hardware chip manufacturer NVIDIA became a "money-making powerhouse." Now, with the improvement of the tech industry's earnings reports, the support for increased AI spending continues, and NVIDIA chips are expected to continue to be sought after.

Vivek Arya, an analyst at Bank of America, predicted in a report on Friday that NVIDIA's quarterly revenue as of January will reach $20 billion, and as of April, it will reach $21.4 billion, exceeding market expectations by 3% to 5%. At the same time, the target price for NVIDIA has been raised from the previous $700 to $800.

Cutting costs to make room for AI spending

Tech giants such as Amazon, Microsoft, Google, and Meta Platforms Platforms have all stated that they will continue to increase their spending on AI. Amazon CEO Andy Jassy used over 800 words to elaborate on this topic at the beginning of the earnings conference call, stating that AI is an area the company "universally focuses on and invests in."

Even Apple has joined the ranks, with CEO Tim Cook stating, "We will continue to spend a lot of time and energy, and we will share details of our work in this field later this year."

In terms of investment scale, the four major tech companies had a total capital expenditure of $43.5 billion in the fourth quarter of last year, a 9% increase year-on-year. These four companies have all explicitly stated that their investment scale will be even higher this year as they strive to improve their AI capabilities.

Meta Platforms Platforms has raised its overall capital expenditure cap to $37 billion by 2024, and Amazon has also stated that it will increase its investment in AI. Analysts predict that Amazon's overall capital expenditure in 2024 will reach $59.9 billion.In order to increase AI spending, major giants are cutting costs in other areas to make room.

Meta Platforms CEO Mark Zuckerberg emphasized on Thursday that the company will continue to make efforts in the field of artificial intelligence while implementing broader cost-cutting measures. Microsoft CEO Satya Nadella told investors that the company is committed to expanding AI investments and cloud computing spending, which means closely monitoring expenses in other departments and implementing strict cost management for each team.

Amazon CEO Andy Jassy stated during this week's earnings conference call that artificial intelligence will continue to be an important investment area for the company. As Amazon allocates more funds to LLM, other AI projects, and necessary infrastructure, capital expenditures for this year will also increase.

So far, investors have expressed their willingness to accept such expenses given the opportunities in artificial intelligence. It is worth mentioning that, as demonstrated by Google and Microsoft, outstanding performance makes it easier to accept future large-scale investments.

Investment Focus: LLM and AI Agents

At the beginning of 2024, corporate executives also outlined their ongoing investment plans in the field of artificial intelligence this year and provided clearer explanations of their strategies to investors.

According to the latest earnings conference call, a key priority area is "AI Model as a Service," where customers can use and customize large models according to their own needs. Another area of investment is artificial intelligence agents, ranging from chatbots to coding assistants and other productivity tools.

Nadella pointed out that Microsoft Azure is the main product for "Model as a Service," emphasizing that customers do not need to manage underlying infrastructure but can access a range of large and small language models, including some models from Cohere, Meta Platforms, and Mistral, as well as open-source options. Nadella said that one-third of Azure AI's 53,000 customers have joined in the past 12 months.

Zuckerberg, on the other hand, stated during the company's conference call that Meta Platforms will to some extent focus on building an artificial intelligence agent. "One of our main goals in the future will be to create the most popular and advanced artificial intelligence products and services. If we succeed, everyone who uses our services will have a world-class AI assistant to help them complete their work."