(Bloomberg) — With questions swirling around Federal Reserve policy, the state of the economy and the US presidential race, at least one thing seems clear on Wall Street: spending on artificial intelligence remains a central priority.

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Companies are pouring tens of billions of dollars into building out AI infrastructure and services, making the beneficiaries — notably Nvidia Corp. — close to a sure thing in terms of their growth prospects. The chipmaker’s results next week will provide further clarity on AI demand, and could vault the shares back into record territory.

“We’re nowhere near close to finishing the build out of AI infrastructure, and that gives you a very good line of sight in terms of the growth you can expect over the coming years,” said Erik Swords, lead portfolio manager at Voya Investment Management.

Rather than being in the late innings of this theme, “we’ve barely walked out of the dugout,” Swords said. “So while we’ll see volatility over the short term, I don’t have any concerns about where these AI hardware stocks are trading over the medium or long term.”

Nvidia shares were little changed on Wednesday.

Investors have scrutinized spending levels more closely this earnings season, in some cases punishing stocks for favoring capex over more shareholder friendly policies. Concerns about the returns from AI investments recently contributed to a tech selloff, although that dip was readily bought amid signs that economic growth remains resilient and rising confidence that the spending on AI itself will stay strong.

AI hardware and chip companies have led the bounce in the Nasdaq 100 from its August low, with Nvidia the index’s top performer, up almost 30% and just 6.1% short of the all-time high, as of its last close. Peers Micron Technology Inc., Marvell Technology Inc., Super Micro Computer Inc., Broadcom Inc., Advanced Micro Devices Inc., and ARM Holdings Plc have all starred in the rebound.

Nvidia’s results follow a few weeks after reports from a group of megacaps — including Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc., which together account for more than 40% of Nvidia’s revenue — underscored their commitment to spending on AI. Strong monthly sales from Taiwan Semiconductor Manufacturing Co. similarly pointed to robust AI demand.

CEOs at tech giants, including Alphabet and Meta, have said they would rather overspend on AI than risk under-investing in the technology. Such comments, given these players’ deep pockets, suggest AI spending will remain durable even if the economic backdrop weakens.

“For all intents and purposes, companies this big don’t have limits on their resources, and they can spend for years on AI if they feel like missing out puts their dominance at risk,” said Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments.

The build out of AI infrastructure is expected to be both enormous and long lasting. According to Needham, which cited a conversation it had with the CEO of a generative AI infrastructure company, investment in data center infrastructure needed to support GenAI could reach $6 trillion.

Even so, there’s evidence this trend isn’t fully appreciated by the market. Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, estimates that capex from big tech could potentially increase by as much as 25% in 2025, well above the consensus expectation for 10-15% growth. This “is especially positive for AI enablers in the semiconductors field,” she wrote.

Spending on AI has yet to translate to dramatically improved growth and efficiency for Nvidia’s biggest customers. However, analysts are confident that the current pace of outlays is sustainable. Morgan Stanley wrote that average capex intensity — a measure of capex relative to revenue — is roughly 25%, which it called “a healthy level.” Furthermore, the ratio of capex to Ebitda “shows sufficient cash flow for spending.”

Nvidia’s results “will dispel concern and drive share price rebounds for the overall AI supply chain,” analyst Charlie Chan wrote.

To be sure, some are yet to be convinced that spending on AI will be enough to continue lifting AI hardware stocks, given they trade at multiples that provide little room for disappointment. Some companies in the group, including Super Micro and Dell Technologies Inc., have struggled to regain their momentum of earlier this year, even with recent strength.

“Nvidia’s valuation can be justified if you can underwrite the sustainability of the earnings stream, but risks seem greater because the companies doing the spending can be rewarded if they stop, while there would only be downside for hardware,” said Allspring’s VanCronkhite. “We’re not at the point where investors are ready to dump stocks, but they’re starting to ask questions about the ROI from AI, and that’s the first step before actions get more dramatic.”

Tech Chart of the Day

Netflix Inc. shares gained 1.5% on Tuesday, with the streaming-video company closing at a record for the first time in nearly three years. The stock is now up more than 40% this year, easily outperforming other streaming stocks as its strategy to improve profitability plays out.

Top Tech Stories

• Microchip Technology Inc. said Tuesday that its servers were hit by a cyberattack that has forced the US chipmaker to shut some of its systems and scale back operations.

• Walmart Inc. raised about $3.6 billion by selling its stake in Chinese e-commerce firm JD.com Inc., winding down an eight-year partnership that appears to be paying diminishing returns amid a challenging landscape for Chinese tech giants.

• The rapid rise in Ola Electric Mobility Ltd. shares is vindicating the founder’s push to list the company despite initial skepticism over valuation.

• Condé Nast has penned a multiyear agreement with OpenAI to license the magazine company’s content, the latest high-profile media deal for the artificial intelligence startup.

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—With assistance from Subrat Patnaik and Jeran Wittenstein.

(Updates to market open.)

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