It’s always a good idea to monitor what myriad industry participants say about the market before buying into a stock, and that’s definitely the case with Nvidia (NASDAQ: NVDA). The technology company’s main demand driver is spending on artificial intelligence (AI) and the data centers necessary to support its growth.
Despite many fears and analyst questions in the recent earnings calls, there’s no real sign of weakening AI demand and spending on data centers. On the contrary, there’s plenty of evidence suggesting that data center demand is holding up or even accelerating. Here are three reasons:
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Trading in the first quarter was excellent, and companies in the data center space have good momentum.
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Anecdotal evidence from industry players suggests growth is accelerating, and their outlook is excellent.
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Commentary from hyperscalers, along with their capital spending plans, suggest ongoing growth.
1. First-quarter trading
There was nothing wrong with AI and data center spending in the first quarter. Google parent Alphabet), said growth in its AI products was “much higher” than Google Cloud’s 28% revenue growth rate in the quarter.
It was a similar story at another of the largest hyperscalers, when Microsoft chief financial officer Amy Hood told investors on its earnings call, “And again, this quarter, revenue from our AI business was above expectations.”
The pick-and-shovel players echoed this theme. For example, Nivdia partner Vertiv, which offers crucial digital infrastructure to data centers and communications companies, increased its backlog by 10% to $7.9 billion in the first quarter compared to the end of 2024, and reported a book-to-bill ratio of 1.4.
And nVent Electric, which supplies electrical connection and protection products, has been aggressively investing to increase its data center exposure. On its earnings call, CEO Beth Wozniak reported mid-teens order growth with “strong double-digit growth in data solutions and mid-single-digit growth in the rest of the business.”
Image source: Getty Images.
2. Growth is accelerating
For nVent, data center growth isn’t slowing. In fact, Wozniak is seeing “an acceleration and increased demand for our solutions.” It’s a viewpoint mirrored by mechanical and electrical contractor Comfort Systems USA, which currently generates 37% of revenue from working on data centers and semiconductor fabrication plants. Its chief financial officer, William George, recently told investors, “There is no sign of a let-up in demand for electricians, and pipe fitters, and plumbers to help build data centers.”
Vertiv CEO Giordano Albertazzi said that the 12-month-out pipeline and beyond was growing.
Image source: Getty Images.
3. Hyperscalers keep spending
In concert with its torrid rate of growth in AI products, Alphabet CEO Sundar Pichai said, “We are definitely investing more” in AI, and management confirmed its intent to make $75 billion in capital investments overall in 2025.
It was a similar story at hyperscaler Microsoft, whose management said it was short of data center space. There were fears about the spending outlook in this category because Microsoft was reportedly pulling back on data center leases and halting projects.
However, CEO Satya Nadella commented on the need to balance data center investment with where the workload will be and the fact that Microsoft Azure is short of data center space overall, which suggests the pullbacks were more to do with adjustments in the location of spending rather than a general pullback.
Is Nvidia stock a buy?
While a pullback in data center spending could always happen, there’s no evidence of it so far — and no suggestion, at least from the companies discussed above, that one is coming anytime soon.
That’s great news for Nvidia investors, and it’s also important to note because the market has had a month to digest the new “Liberation Day” tariffs. As such, Nvidia and the other data center stocks remain in play.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Comfort Systems Usa, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
