Meta's plan to invest more heavily in artificial intelligence infrastructure caused Meta stock to sink Thursday, but the tech giant's capex news lifted AI stocks, particularly shares of tech hardware companies, including Nvidia, Arista Networks, Dell Technologies and Super Micro Computer.
Late Wednesday, Meta announced an increase to its capital expenditures to fund its AI ambitions. The Facebook parent forecasts capex spending of $35 billion to $40 billion this year, up from its prior range of $30 billion to $37 billion.
Meta's capex increase is another sign of an AI arms race among the tech giants. Tesla on Tuesday also announced increased spending on AI infrastructure.
"We see both these pieces of news as indicative of continued strong demand for AI servers and particularly Nvidia GPUs (graphics processing units)," Wedbush Securities analyst Matt Bryson said in a client note Thursday. He rates Nvidia stock as outperform with a price target of 1,000.
AI Stocks: Boost From Meta's Big Spending Plan
On the stock market today, Nvidia stock rose 3.7% to close at 826.32.
Among other semiconductor stocks with AI exposure, AMD increased 1.3% on Thursday. Broadcom advanced 3% and Marvell Technology rose 4.1%.
Meta's aggressive capex spending will have multiple beneficiaries, Mizuho Securities trading-desk analyst Jordan Klein said in a client note. In addition to GPUs and custom processors, the investment surge will lift makers of networking and optical gear, memory, storage and AI servers.
Arista Networks is one such beneficiary, Klein said. ANET stock rose 3.9% to 264.76 on Thursday.
Arista gets a large portion of its revenue from two major cloud companies, Meta and Microsoft, Barclays analyst Tim Long said in a client note.
JPMorgan analyst Samik Chatterjee said Meta's commentary is positive for his "top AI picks": Arista and Coherent. Coherent stock advanced 1.5% to 52.88 on Thursday.
Server makers Dell and Super Micro Computer also rose on Thursday. Dell climbed 3.9% to 124.91. Super Micro increased 4.3% to 787.40.
Nvidia Leads 'Top AI Plays'
In a client note, Evercore ISI analyst Mark Lipacis said Meta's commentary supports his "top AI plays." They include Nvidia stock, Broadcom, AMD and Marvell.
"Competition drives capex, and the competitive juices around AI seem to be flowing," he said. "After Meta's AI capex uptick, we wouldn't be surprised to see other companies discuss an upward bias to spending on AI infrastructure through 2024 and 2025."
Two other hyperscale cloud service providers, Microsoft and Google parent Alphabet, will report their March-quarter results after the market close Thursday. Investors now will be focused on their capex spending plans.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
