Are you worried that Nvidia Corp. won’t be able to keep growing over the next few years? There may be a new reason for buyers not to worry.
A new report from Bain Technology says the market for AI hardware and software could grow from about $185 billion now to as much as $990 billion by 2027. This report interests Jordan Klein, an analyst at Mizuho who works from his desk.
“This prediction could ease anxieties on the buy side about the long-term viability of big cloud investments and AI investment spending well past 2025,” Klein wrote.
Investors in Nvidia NVDA 2.18% are most worried about how fast AI will cost money after 2026. Recently, big cloud companies have been putting a lot of money into AI hardware. However, there is a chance that they will change their minds about their spending if AI doesn’t give them the results they need. Klein says that there is “zero clarity around growth rates for [2026] on capex spend,” even though most companies have said they plan to spend more next year.
What the Bain report said about the future growth of data-center graphics processing units was pretty general. It said that demand “will continue to grow as [large-language models] expand their capabilities to process multiple data types simultaneously (text, images, and audio) and as venture capitalists pour even more money into AI start-ups.”
“If data centers’ demand for current-generation GPUs doubled by 2026, which seems likely based on how things are going now, some suppliers of key components would have to boost their output by 30% or more,” the study said.
Klein was also encouraged by the deal that Microsoft Corp. MSFT 0.64% and Constellation Energy Corp. CEG 3.88% signed last week to buy power.
Klein asked Microsoft if they would sign a 20-year deal to buy and supply nuclear power from Constellation Energy, which would cost $1.6 billion just to restart the plant that won’t start making power until 2028, if they planned to slow or cut back on current capex growth and AI investment. “No!”
After going up about 4% on Tuesday, Nvidia shares are up another 2.9% on Wednesday.
