Meta’s plan to invest more in artificial intelligence infrastructure caused Meta (META) stock is set to fall on Thursday, but the tech giant’s investment news boosted AI stocks, particularly shares of technology hardware companies, including Nvidia (NVDA), Arista Networks (A NET), Dell Technologies (DELL) and Super microcomputer (SMCI).
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Late Wednesday, Meta announced an increase in its capital spending to fund its AI ambitions. Facebook parent company forecasts capital spending of $35 billion to $40 billion this year, up from the previous range of $30 billion to $37 billion.
Meta’s investment increase is another sign of an AI arms race among tech giants. Tesla (TSLA) also announced increased spending on AI infrastructure on Tuesday.
“We view these two pieces of news as signs of continued strong demand for AI servers and Nvidia GPUs (graphics processing units) in particular,” Matt Bryson, an analyst at Wedbush Securities, said in a note to clients on Thursday. He rates Nvidia shares as outperform with a price target of 1,000.
AI Stocks: Boosted by Meta Big Spending Plan
In afternoon trading on the stock market today, Nvidia shares rose 4.1% to 829.
Among other semiconductor stocks with AI exposure are AMD (AMD) rose 1.6% on Thursday. Broadcom (AVGO) rose 3.5% and Marvell technology (MRVL) rose 3.4%.
Meta’s aggressive capital spending will have multiple beneficiaries, Jordan Klein of Mizuho Securities Securities said in a note to clients. In addition to GPUs and custom processors, the investment boost will also boost manufacturers of networking and optical devices, memory, storage and AI servers.
Arista Networks is one of those beneficiaries, Klein said. ANET shares rose 4.7% to 266.63 in afternoon trading on Thursday.
Arista generates a large portion of its revenue from two major cloud companies, Meta and Microsoft (MSFT), Barclays analyst Tim Long said in a note to clients.
JPMorgan analyst Samik Chatterjee said Meta’s comment was positive for his “top AI picks”: Arista and Coherent (COHR).
Server makers Dell and Super Micro Computer also rose on Thursday. Dell climbed 3.6% to 124.53. Super Micro rose 5% to 792.44.
Nvidia leads the “Top AI Games”.
In a note to clients, Evercore ISI analyst Mark Lipacis said Meta’s comment supports its “top AI games.” These include Nvidia shares, Broadcom, AMD and Marvell.
“Competition is driving investment, and competitive pressures around AI appear to be flowing,” he said. “Following the increase in AI investment at Meta, we would not be surprised to see other companies discussing an upward trend in AI infrastructure spending through 2024 and 2025.”
Two other hyperscale cloud service providers: Microsoft and Google alphabet (GOOGL) will report its March quarter results after the market closes on Thursday. Investors will now focus on their investment plans.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks, click here.
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