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Fears of an AI bubble bursting appear unjustified — at least judging by Big Tech earnings so far. Alphabet and Club names Amazon , Microsoft and Meta Platforms last week signaled they will continue to aggressively invest in artificial intelligence and cloud infrastructure by either reaffirming or raising their capital expenditure (capex) commitments for their current quarters while keeping their full-year budgets intact. That’s a big deal, considering these four are the dominant hyperscalers — a common term for companies that operate massive data centers to deliver cloud computing platforms or other products and services to customers. Advanced Micro Devices , whose customers include Microsoft and Meta, delivered on that enthusiasm, with a better-than-expected quarter and rosy guidance, which included a $700 million China headwind. Data center revenue also topped forecasts. CEO Lisa Su told CNBC Wednesday that customer ordering patterns in April — a month into the second quarter — are “quite robust.” She added, “It gives us confidence that people aren’t making very short-term decisions right now.” AMD was one of the first chipmakers to report results. Club names Nvidia reports on May 28 and Broadcom on June 5. Many AI bears have warned that these tech titans spent too much and too quickly to build out their AI infrastructure and would need to pull back, especially in this uncertain economic environment. Their worry, in turn, is that chipmakers and derivative data center stocks would get hurt. But, last week’s reports show AI capacity remains a top priority for 2025 and beyond, as companies race to compete in the fast and widespread growth of the technology. “The continued investment by the hyperscalers, even amid macroeconomic uncertainties, came as a major relief to the AI infrastructure theme,” said Jeff Marks, the Investing Club’s director of portfolio analysis. The hyperscalers’ first-quarter earnings prints are “supportive of continued AI investment (and continued AI enthusiasm) among investors, for now,” Barclays said in a Sunday note to clients. The analysts called out Amazon, Microsoft, Meta and Alphabet as companies whose growth is “supporting continued investment infrastructure (in) chips, servers, power and data centers.” All four companies provided bullish updates on their spending intentions. In its most recent quarter , Amazon boosted capex by 67% year over year to $24.3 billion. The tech giant is ramping up investments to address capacity constraints at its cloud unit, Amazon Web Services (AWS), where new infrastructure is being consumed as fast as it comes online. Microsoft said it expects capex to increase sequentially in the current quarter as it continues investing in AI-powered servers and data center assets. The company’s strong top and bottom line beat and guidance was so notable because in the weeks leading up to earnings, several media reports suggested Microsoft could be pulling back on its data center commitments and canceling leases, a sign of falling demand. Results, however, showed accelerating revenue growth in Azure, its cloud computing business. Meta raised its full-year 2025 capex guidance to as much as $72 billion, up from the previous range of $60 billion to $65 billion, while Alphabet reaffirmed plans to spend $75 billion this year, focused primarily on services and data center expansion. All this spending should also be a tailwind for several of the Investing Club’s data center plays, companies that supply the hardware and infrastructure to power them. That includes Nvidia , which provides the high-performance GPUs that train and run the most complex AI models. Amazon’s AWS relies heavily on Nvidia’s accelerators to power its most demanding AI workloads. Despite the stock’s 15% move lower this year on the U.S.’s trade war with China, Nvidia remains at the center of the AI arms race, and the ongoing hyperscaler boom ensures high volume demand for its chips. It should set a favorable backdrop for Nvidia’s upcoming earnings. In a CNBC interview Tuesday, Nvidia CEO Jensen Huang was asked about the hyperscalers’ continued commitment to building out AI. “The early hyperscalers realized a very profound insight: That they are now intelligence factories,” Huang said at ServiceNow’s Knowledge 2025 conference in Las Vegas. “They’re intelligence generators. It’s not a data center that stores information. It’s a factory that produces intelligence.” Broadcom also stands to benefit from the commitment to the buildout. The company is working on custom chip designs with at least several major hyperscalers. While it doesn’t disclose which hyperscalers it partners with, those clients are widely believed to include Alphabet and Meta. Broadcom currently has three hyperscale customers where it deploys their AI accelerators at scale, CEO Hock Tan said during the company’s latest post-earnings call March 6. Tan also mentioned the company is talking to four additional customers or potential future “partners” who are trying to create their own customized AI accelerators. These custom chips help large tech companies run highly specialized AI workloads more efficiently and they represent a growing revenue stream for Broadcom. The AI boom goes beyond semiconductor chips and is also boosting demand for the physical components needed to power and cool massive data centers. Industrial stock Eaton , which derives 20% of its sales from the data center market, has continued to invest in this high-growth segment. While the company delivered better-than-expected results last Thursday, the stock fell, marking the fifth straight quarter that shares dropped on earnings day. Jim Cramer said last week that he’s not ready to give up on Eaton, because it’s “doing quite well,” referring to the company’s largely positive first-quarter results and guidance. Another, Dover , has data center tailwinds. This diversified industrial company makes critical cooling components such as thermal connectors and heat exchangers for data centers. The company posted a mixed first quarter in late April with modest growth in organic sales and booking, but its growing backlog put it in a solid position for stronger performance in the second quarter. In our April Monthly Meeting, Cramer said that while Dover isn’t a haven from escalating recession concerns or Trump’s tariff moves, we’re staying long for now. He added that Dover is remaking its portfolio to focus on more attractive areas, and it has plenty of dry powder to make more moves. Case in point: On Monday, Dover announced it was buying Germany-based Sikora for $622 million. Sikora makes specialized systems that measure different parameters in the cables that go into energy-intensive data centers, a growing end-market for Dover. (Jim Cramer’s Charitable Trust is long AMZN, MSFT, META, ETN, DOV, AVGO, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Scott Guthrie, executive vice president of cloud and enterprise at Microsoft Corp., speaks during the Microsoft Developers Build Conference in Seattle, Washington, U.S., on Monday, May 7, 2018.
Grant Hindsley | Bloomberg | Getty Images
Fears of an AI bubble bursting appear unjustified — at least judging by Big Tech earnings so far.
