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A busy week of Big Tech earnings made us feel more confident about our investments in Nvidia, Broadcom and Eaton, as spending on AI chips and data centers remains a clear priority. This week’s quarterly reports from Club holding companies Alphabet, Microsoft, Meta Platforms and Amazon varied in overall quality, but a common thread among them all was a continued commitment to big investments in AI. More importantly, all four companies indicated that their investments (reflected in their capital expenditure or capex outlook) were gaining momentum. Capex is money spent to purchase or improve physical assets, including the construction of data center buildings and the computing hardware they contain. Nvidia, Broadcom and Eaton are set to benefit from this continued spending: Nvidia as the dominant AI chip maker; Broadcom as Alphabet’s partner on Google parent company’s proprietary AI chip and provider of overall data center networking technology; and Eaton as a supplier of electrical components and power systems used to run data centers. Among the three, Nvidia is the biggest winner, as much of its total revenue is tied to AI initiatives, followed by the more diversified efforts of Broadcom and Eaton. However, Broadcom and Eaton’s exposure to the fast-growing AI market is part of our investment cases for both companies. For its part, Eaton’s earnings report on Thursday morning strengthened our thesis, offering an optimistic outlook for 2024 that includes the strength of its data center business. Nvidia is scheduled to report its quarterly results on February 21, while Broadcom is expected to do so shortly after. Big Tech spending on AMZN 1 year has driven up Amazon stock performance over the past 12 months. Amazon’s capital spending is expected to increase year-over-year in 2024, Chief Financial Officer Brian Olsavsky said Thursday. The main drivers of the rebound will be investments in infrastructure to drive the growth of the Amazon Web Services (AWS) cloud computing unit, the chief financial officer said, including initiatives on generative artificial intelligence and large language models. Amazon’s incredible quarter released Thursday night sent its stock up 8% on Friday. Amazon did not provide specific capital spending guidance for 2024, but analysts are estimating around $60 billion, according to estimates compiled by FactSet. In fact, Amazon’s capital spending fell about 17% year over year in 2023 to $48.4 billion as the company reduced spending on its e-commerce logistics network. Some of Amazon’s spending will likely go toward its custom AI chips, known as Trainium and Inferentia. But the Seattle-based tech giant also buys Nvidia chips. On Thursday’s post-earnings call, CEO Andy Jassy said AWS offers the “widest collection of compute instances powered by Nvidia chips.” In November, the two companies announced an expanded partnership that brings Nvidia’s DGX Cloud supercomputer service to AWS. META 1Y mountain Meta Platforms stock performance over the past 12 months. In addition to its shocking earnings report Thursday night, which sent shares up more than 20% on Friday, Meta Platforms raised the top end of its full-year capital spending forecast to $37 billion from $35 billion. The parent of Instagram and Facebook left the lower end of its guidance unchanged at $30 billion. In 2023, Meta’s capital spending amounted to $27.3 billion, up from $31.4 billion a year earlier. Expected growth in 2024 is driven by spending on servers (both AI-specific servers containing AI chips like those from Nvidia and those aimed at more general computing) and the construction of data centers designed to better handle the needs of AI workloads, Chief Financial Officer Susan Li said on the earnings call. “While we do not provide guidance for years beyond 2024, we expect our ambitious long-term AI research and product development efforts will require increasing infrastructure investments beyond this year,” Li said. CEO Mark Zuckerberg reiterated that Meta is on track to own 350,000 top-of-the-line AI chips from Nvidia, known as H100, by the end of the year. When other processors are taken into account, Meta’s AI-focused computing infrastructure will be equivalent to nearly 600,000 H100s, Zuckerberg said. Meta has said it is also ordering Advanced Micro Devices’ new AI chip, the MI300X, which was launched late last year as an alternative to Nvidia. The social media giant also plans to use custom chips for certain AI tasks. MSFT 1Y lifts Microsoft stock performance over the past 12 months. Late Tuesday, Microsoft, one of the biggest buyers of Nvidia chips lately, said it expected capital spending in its current quarter to “increase materially” compared to the three months ended Dec. 31. In the previous period, which was Microsoft’s fiscal second quarter of 2024. , the company spent $9.7 billion on property, plant and equipment. Wall Street expects that figure to rise to $11.64 billion in the current quarter, according to estimates compiled by FactSet. “These data center investments support our cloud demand, including the needs to scale our AI infrastructure,” Chief Financial Officer Amy Hood said on the call. Microsoft’s past spending has already translated into financial gains: Its cloud computing unit, Azure, grew 30% annually in its fiscal second quarter, with artificial intelligence services contributing notably six points of the growth. In fact, Azure’s growth rate surpassed that of AWS and Google Cloud for the second consecutive quarter. It’s further evidence of Microsoft’s emerging leadership position in AI, based on its close partnership with OpenAI, the startup whose AI chatbot ChatGPT went viral in November 2022 and sparked the current wave of generative investment in AI. Microsoft has also placed orders for AMD’s MI300X. GOOGL 1Y highlights the performance of shares of Alphabet, Google’s parent company, over the last 12 months. Alphabet expects its capital expenditures in 2024 to be “markedly higher” than in 2023, which amounted to $32.5 billion, Chief Financial Officer Ruth Porat said on Tuesday night’s earnings call. Alphabet did not offer specific figures, but analysts currently project full-year capital spending of around $41 billion, representing 26% year-over-year growth, according to FactSet. In the company’s fourth quarter, capital expenditures increased 37% sequentially to $11 billion, driven largely by spending on servers followed by data centers, Porat said. Alphabet’s spending on AI chips has typically been split between its custom chips designed in partnership with Broadcom, known as Tensor Processing Units (TPUs), and Nvidia’s offerings. In this way, both Broadcom and Nvidia are poised to benefit from Alphabet’s server spending. In August, Alphabet announced its fifth-generation TPU, which the company has traditionally used for its internal AI work. At the time, Alphabet also detailed an expanded partnership with Nvidia that brought its DGX supercomputing service to Google Cloud. Throughout Broadcom’s entire 2023 fiscal year (figures released with fourth-quarter earnings in December), the company generated approximately $2.8 billion in revenue from the “AI accelerator,” which is essentially the code name for TPUs. Including networking products that tie together parts of the data center, about 15% of Broadcom’s semiconductor revenue was tied to spending on generative AI in fiscal 2023. The company expects that figure to rise to more than 25% in its current fiscal year 2024. (Jim Cramer’s Charitable Trust is long (NVDA, AVGO, ETN, MSFT, GOOGL, META and AMZN. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer , you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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A busy week of Big Tech earnings made us feel more confident about our investments in NVIDIA, Broadcom and Eaton as spending on AI chips and data centers remains a clear priority.