Alphabet Just Delivered Fantastic News for Nvidia Shareholders

Keithen Drury, The Motley Fool

Fri, May 2, 2025, 7:00 AM 4 min read

Key Points

Alphabet still plans $75 billion in capital expenditures for 2025.
Nvidia will be a huge beneficiary of that spending.
The chipmaker's stock trades at an attractive price.

Listening to earnings calls from companies you don't invest in but are important overall is a wise idea. Sometimes, you can pick up on information that can affect a company you care about. This happened recently during Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) conference call, which included key information about Nvidia (NASDAQ: NVDA).

There is a lot of concern about the demand for Nvidia's graphics processing units (GPUs) if the economy starts to slow, but Alphabet seems to be full speed ahead on its data center build-out commitment. This is excellent news for Nvidia, and it could be the very thing it needs to turn its stock around.

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Alphabet's data center build-out plans are still on track

Nvidia's GPUs are vital to data centers, since they are the computing muscle behind many workloads run on the cloud, including training and running AI models. There is considerable fear about Nvidia's demand potentially declining due to companies reining in their spending, but that doesn't appear to be the case.

At the beginning of the year, Alphabet told investors they should expect $75 billion in capital expenditures (capex) for 2025, which is far above and beyond anything that it has spent in the past.

GOOGL Capital Expenditures (TTM) Chart — GOOGL Capital Expenditures (TTM) data by YCharts; TTM = trailing 12 months.

If Alphabet pulled back on its capex, Nvidia would suffer since it had already planned to meet this capacity. During the Google parent's first-quarter conference call, an analyst specifically asked a question regarding this spending, and chief financial officer Anat Ashkenazi confirmed that it's still on track to do so.

Alphabet cannot afford to slow down its buildout because it says that the demand for computing power far exceeds the supply. This is great news for Nvidia -- it's one large client that isn't planning on slowing down purchases of GPUs (among other equipment) because the demand is just too high.

Despite this, Nvidia's stock is still well off its all-time highs because many investors fear that its growth will significantly slow down.

Only one year of growth is priced into Nvidia's stock

Nvidia CEO Jensen Huang doesn't think data center spending will slow down any time soon. In fact, he believes that data center capex will reach $1 trillion by 2030, up from around $400 billion in 2024. Considering that Nvidia generated $115 billion from its data center segment over the past 12 months, it's safe to say that it will capture a large chunk of the overall spending.

Should the demand that Alphabet and its peers see continue at an insatiable pace, then Nvidia's stock will continue to be the rocket ship that it was during 2023 and 2024, not the lame duck it has been so far in 2025.

Nvidia's stock is down around 20% year to date. However, it's still expected to put up monster growth in fiscal 2026 (ending January 2026), with Wall Street analysts estimating a 54% increase. This projection is what gives Nvidia its attractive price tag today.

NVDA PE Ratio (Forward) Chart — NVDA PE Ratio (Forward) data by YCharts; PE = price to earnings.

At 24.6 times forward earnings, Nvidia's stock is far cheaper than it has been in the past. However, this price tag also conveys that once this year's growth is up, Nvidia will just be a market-average performer.

This doesn't dovetail with where Huang thinks the industry is going or with Alphabet's commentary that there is much larger data center demand than supply.

So, if the future holds even more data center demand, then now would appear to be a fantastic time to buy Nvidia shares, as only a single year's worth of growth is priced into the stock.

There are few better bargains in the market right now than Nvidia, and it should be at the top of investors' shopping lists, especially before it reports first-quarter earnings sometime in late May.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.

Alphabet Just Delivered Fantastic News for Nvidia Shareholders was originally published by The Motley Fool

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