Nvidia’s latest earnings report solidified its position as the undisputed leader in the AI chip market. However, the company’s stock experienced a downturn in Thursday’s trading session, a move that seasoned market watchers attribute to investor concerns over the sustainability of massive spending by Nvidia’s largest clients.
The core of the apprehension, as articulated by market analyst Jim Cramer, lies in the potential for these major technology players to maintain their current expenditure levels without a commensurate surge in profitability from their artificial intelligence initiatives. Nvidia’s shares dipped approximately 4% on Thursday, retreating towards their year-to-date breakeven point.
“There’s a perception that all we really care about, or should care about, is how much money Amazon is borrowing, and Microsoft is borrowing, and Meta is borrowing, and will they end up not being able to make any money?” Cramer remarked during a recent broadcast. His perspective is informed by his long-standing investment in Nvidia, predating the artificial intelligence boom ignited by OpenAI’s ChatGPT in late 2022. Cramer clarified that the skepticism is directed at Nvidia’s clients, not the chipmaker itself.
The hyperscalers – namely Amazon, Microsoft, Meta Platforms, and Google’s parent company, Alphabet – have collectively signaled more substantial capital expenditure plans than anticipated in their recent earnings calls. Their combined investment for the current year is projected to reach a staggering $700 billion. This aggressive deployment of capital is exerting pressure on their free cash flow, the financial buffer remaining after operational costs and capital investments.
Financial forecasts compiled by FactSet paint a concerning picture for the free cash flow of several of these tech giants. Amazon is expected to register negative free cash flow in 2026. Alphabet’s free cash flow is projected to decline by 64% year-over-year, settling at $26 billion. Meta’s figures are modeled to drop by a significant 86% to $6.1 billion. Microsoft stands as a relative outlier, with analysts anticipating its free cash flow to remain relatively stable at approximately $71.3 billion for its fiscal year ending in June.
During Nvidia’s recent earnings call, CEO Jensen Huang addressed concerns about his customers’ capacity to sustain their capital expenditure growth. “I am confident in their cash flow growing,” Huang stated. “The reason for that is very simple. We have now seen the inflection of agentic AI and the usefulness of agents across the world in enterprises everywhere. You’re seeing incredible compute demand because of it. In this new world of AI, compute is revenues.” He elaborated that the company is “generating profitable tokens that are productive for customers and profitable for the cloud service providers,” highlighting that the creation of these AI “tokens” directly translates to demand for computing power, which in turn drives revenue growth.
However, Cramer pointed out that bondholders of these hyperscalers, who have financed chip purchases through debt, are more focused on immediate profits rather than future revenue projections. While acknowledging the validity of this concern, Cramer reiterated his conviction in the long-term viability of the AI infrastructure buildout and Nvidia’s pivotal role within it.
This conviction is further bolstered by Nvidia’s expanding customer base beyond the hyperscalers. In its fourth quarter of fiscal year 2026, hyperscalers accounted for slightly over half of Nvidia’s data center revenue. However, CFO Colette Kress noted that growth was increasingly driven by a more diversified set of data center clients.
While the debate surrounding hyperscaler spending may persist, Cramer expressed enthusiasm for Nvidia’s burgeoning partnerships with companies like Anthropic, the creator of Claude, and OpenAI. Nvidia announced a technology partnership with Anthropic in November, and Cramer considers both OpenAI and Anthropic to be “blossoming as gigantic customers.” Nvidia’s chips were instrumental in training OpenAI’s ChatGPT.
Ultimately, Cramer suggests that Thursday’s stock performance can be distilled to a fundamental imperative: “Clients have no choice. They have to spend the money. And then you can say, but maybe they don’t have enough money. Well, there will be this gap where they have revenues but not earnings. But they are all afraid to not make the spend.” This reflects a strategic necessity for these companies to invest heavily in AI infrastructure, even if immediate profitability remains elusive, to avoid falling behind in a rapidly evolving technological landscape.
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