As Nvidia's stock price soared during 2024, the naysayers compared its ascent to Cisco's roundtrip performance during the Tech Bubble of the late 1990s, which was followed by the Tech Wreck of 2000 and 2001 (chart). Cisco was the tech darling of the dawning Internet Age. Nvidia is leading the way in the AI Age. Cisco crashed when the Dot.Com Bubble burst.
When DeepSeek was introduced on January 24, 2025, it was widely feared that Nvidia stock might crash if the current datacenter boom is a bubble bound to burst (chart). Instead, the company today reported a blockbuster fiscal Q1 (ended April), with revenues in its datacenter business (which makes chips and other components used in AI computing systems) surging 73% y/y to $39.1 billion. US technology giants Microsoft, Amazon, Google, and Meta all affirmed plans to boost capital spending on AI infrastructure this year in their latest earnings reports. Analysts expect combined spending by those four alone to top $345 billion this year, up 41% from last year.
We've observed that demand for more datacenter capacity is actually driven by robust demand for more cloud computing. AI is certainly contributing to that demand, but the main driver is the Digital Revolution that started in the mid-1960s. The revolution is all about processing more data, more rapidly, and more cheaply. This process feeds on itself.
