(Feb 13): Big Tech keeps raising its spending plans for artificial intelligence (AI) infrastructure, yet shares of Nvidia Corp, one of the biggest beneficiaries of that flood of cash, have been largely stagnant for months.
The stock is up less than 1% since the beginning of the fourth quarter and has been largely range bound despite hitting a record high in late October. It’s also barely beating the S&P 500 Index to start 2026, a slowdown from Nvidia’s nearly 40% leap in 2025 following two consecutive years of triple-digit percentage gains.
Even ballooning capital spending from Meta Platforms Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc — estimated to exceed US$600 billion in 2026 — hasn’t been enough to meaningfully boost the stock amid increasing anxieties about returns on those investments.
“There is perhaps growing concern that the ultimate revenue from AI will simply not keep up with the capex spend that’s been announced,” said JoAnne Feeney at Advisors Capital Management, adding that more spending now raises the probability that the market will reach satiation faster. It’s “going to move up the date at which they pause and let the new compute be digested.”
The cyclical nature of the chip industry is baked into Nvidia’s valuation, which has compressed as revenue growth is expected to slow in the coming years. Sales are projected to expand 58% in the current calendar year and 28% in 2027, according to data compiled by Bloomberg.
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Nvidia shares trade around 24 times profit estimates, roughly in-line with the Nasdaq 100 index and a slight premium to the S&P 500. Even though this price-to-earnings ratio is far below the five-year average for the stock at 38 times, investors aren’t counting it as a discount.
Valuations for infrastructure providers like Nvidia are likely to move lower as growth in capital spending decelerates, according to UBS strategists led by Ulrike Hoffmann-Burchardi.
“Capex growth is likely to moderate from these levels, which could improve investor perceptions of those doing the spending, but is a potential negative for some companies in the enabling layer,” they wrote in a note dated Feb 10.
See also: OpenAI debuts first model using chips from Nvidia rival Cerebras
The next catalyst for Nvidia shares is its upcoming earnings report, due Feb 25 after markets close. Investors will be focused on Nvidia’s guidance and demand for chips, which have accounted for a large chunk of hyperscaler spending in recent years.
“It really does just come down to the valuation and how rich the company already is,” said Shelby McFaddin, an investment analyst at Motley Fool Asset Management. Investors want to “wait a second and actually see what Nvidia has to say about it before we reward them.”
Wall Street analyst estimates for Nvidia’s revenue and earnings in 2026 have barely budged since the tech giants revealed their mega-spending plans. Of course, analysts are likely waiting to hear from Nvidia before making changes to their models.
After a big stock run up like Nvidia has had, it’s natural for there to be a period of consolidation, but sentiment can change rapidly, said Jim Thorne, chief market strategist at Wellington-Altus.
“It’s psychology,” Thorne said. “All of a sudden everybody believes the story and the stock goes crazy up.”
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