The Artificial Intelligence (AI) Infrastructure Stock That Hyperscalers Are Fighting Over for 2026

Core Insights - The demand for artificial intelligence (AI) is driving significant investments in computing power and data centers, benefiting Nvidia [1] - Major cloud providers are expected to increase their capital expenditures significantly, with a focus on acquiring Nvidia's GPUs for AI applications [2] Group 1: Nvidia's Financial Performance - Nvidia's data center revenue surged by 66% year-over-year in the fiscal third quarter, reaching $51 billion, which constitutes 89% of its total revenue [4] - Analysts project a 67% year-over-year increase in Nvidia's total revenue for the fiscal fourth quarter [4] - Nvidia's profit over the last four quarters amounted to $99 billion, reflecting a 53% profit margin [9] Group 2: Market Dynamics and Competitive Position - The top hyperscalers, including Amazon, Microsoft, and Google, are heavily investing in data centers, with spending on chips and computing systems making up about half of their expenditures [2] - Nvidia's upcoming Rubin chips are expected to enhance AI performance, further incentivizing cloud providers to invest in new data center capacities [7] - Despite increasing competition in AI chips, Nvidia remains a preferred choice among major tech companies, as evidenced by its strong revenue growth and high profit margins [9][10] Group 3: Investment Outlook - Nvidia's stock price does not fully reflect its long-term growth potential, with a forward price-to-earnings ratio around 24, which is lower than the expected earnings growth of 57% this year and 37% annually in the coming years [8] - The current valuation presents a favorable risk-to-reward proposition for investors, given Nvidia's solid competitive position in the AI chip market [10]