Nvidia’s next test: Can AI spending power the stock higher?

Yes - sustained AI spending can still push Nvidia shares higher, but the easy gains are likely behind it, according to analysts. The next phase depends less on hype and more on whether hyperscalers continue to commit capital at scale, and whether Nvidia can defend margins as competition intensifies.

That question moved to the foreground this week after Nvidia shares rebounded sharply, rising more than 8% in a single session. The catalyst was not Nvidia’s own earnings, but Amazon’s forecast of roughly $200 billion in capital expenditure for 2025, much of it aimed at AI infrastructure. For investors, it was a reminder that the AI build-out remains very real - even as valuations face tougher scrutiny.

What’s driving Nvidia now?

Amazon’s spending guidance landed at a crucial moment for Nvidia. Earlier in the week, the stock had been under pressure as investors reassessed stretched tech valuations following a broad sell-off. Amazon’s outlook reframed that weakness. 

A $200 billion capex plan does not signal caution; it signals acceleration. Nvidia remains the primary supplier of high-performance GPUs powering hyperscale AI data centres, making it a direct beneficiary of that spending.

The market reaction revealed where investor confidence truly lies. Amazon shares fell on the earnings miss, yet Nvidia surged. That divergence underlines Nvidia’s unique position in the AI ecosystem. Demand for compute is no longer theoretical or future-facing. It is embedded in current budgets, multi-year contracts, and strategic infrastructure decisions that are difficult to unwind once committed.

Why It Matters for Nvidia’s Valuation

Nvidia’s valuation has become the central battleground. Since the launch of ChatGPT in late 2022, Nvidia has delivered quarter after quarter of revenue beats, driven by explosive AI demand. That success pushed the stock into most institutional and retail portfolios, leaving less fresh capital on the sidelines to fuel automatic upside.

CEO Jensen Huang addressed this tension directly, calling the recent pullback in tech stocks “illogical”. While such comments naturally reflect corporate optimism, Huang’s remarks have historically carried weight with markets. Investors appear to be interpreting his stance as a signal that current valuations still reflect genuine earnings power rather than speculative excess.

Impact on the AI and semiconductor landscape

Nvidia’s rebound has implications beyond a single stock. It reinforces the idea that AI spending is becoming increasingly concentrated among a small group of mega-cap buyers, rather than fading altogether. Amazon, Microsoft, and Google are not trimming AI budgets - they are scaling them.

For the semiconductor industry, this concentration favours Nvidia. Its competitive advantage extends beyond hardware into software, networking, and developer ecosystems, making switching costs high. While AMD and Broadcom are gaining traction, Nvidia’s integrated platform remains difficult to replicate at scale. That insulation gives Nvidia more pricing power than most peers, at least in the near term.

Expert outlook: Where the real test lies

Attention now turns to Nvidia’s upcoming earnings on 25 February. Goldman Sachs expects the company to deliver a revenue beat of around $2 billion for the fiscal fourth quarter, forecasting revenue of $67.3 billion and earnings above consensus. The bank also projects Nvidia to outperform Street estimates for the following quarter.

However, Goldman struck a cautious note. With expectations already elevated, investors may shift their focus from short-term beats to Nvidia’s guidance for 2026 and 2027. In other words, the market is less interested in how strong AI demand has been and more concerned with how long Nvidia can sustain growth without margin compression as competition increases.

Key takeaway

AI spending can still push Nvidia higher, but the market’s tolerance for disappointment is shrinking. Amazon’s $200 billion capex plan reaffirmed Nvidia’s central role in the AI economy, supporting near-term optimism. Yet the stock’s next move will depend less on demand headlines and more on long-term guidance and margin resilience. Nvidia’s next test is no longer whether AI is real - it is whether dominance can be sustained.

Nvidia technical outlook

NVIDIA continues to trade within a broad consolidation range following earlier volatility, with price oscillating between the lower boundary near $170 and the upper zones around $196 and $210. 

Bollinger Bands show moderate expansion relative to earlier compression, indicating a pickup in volatility without a sustained directional move. Momentum indicators show a short-term rebound, with the RSI rising sharply above the midline after dipping, reflecting a recovery from weaker conditions rather than trend acceleration. Trend strength remains subdued, as ADX readings stay relatively low, suggesting limited directional dominance.