Investing.com-- Bank of America (BofA) analysts said in a Friday note that the outlook for data center and artificial intelligence spending demand in 2025 remained strong, citing positive recent indicators from major U.S. “hyperscalers.”
BofA said AI chipmakers Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) remained its top picks for this trend, and that expanded spending also increased the appeal of AMD (NASDAQ:AMD) and Marvell Technology Inc (NASDAQ:MRVL).
BofA noted that while first-quarter global AI hyperscaler spending came in at $92.0 billion, slightly below expectations of $93.8 billion, most hyperscalers appeared to have shown an intent to keep spending on AI in the coming quarters.
BofA expects total AI capex spending at $414 billion in 2025- up 44% from last year. Capex is also set to increase to $432 billion in 2026.
The outlook for AI capex remains strong despite multiple concerns over slowing spending in the long run, especially after the release of China’s DeepSeek AI earlier this year sparked a rush into more efficient AI models with lower hardware requirements.
BofA noted that of major U.S. hyperscalers, Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) reiterated their capex outlooks for 2025, while Meta (NASDAQ:META) hiked its 2025 capex guidance to $64 billion- $72 billion from $60 billion-$65 billion.
Amazon (NASDAQ:AMZN) did not update its $105 billion 2025 outlook from its Q4 earnings, but major chip partner Marvell was seen increasing its volumes.
“We expect AI scaling to continue on: 1) traditional pre/post-training of frontier models (model sizes 2x every six months), 2) derivative models (like DeepSeek), 3) test-time scaling for inference (up to >100x more tokens generated vs. normal inference), and 4) sovereign/enterprise AI which are still in their early innings,” BofA analysts wrote in a note.
Wall Street’s AI hyperscalers are by far the biggest spenders on AI infrastructure in the world, having committed hundreds of billions of dollars to the fast-growing technology over the past two years.
This in turn has greatly benefited chipmakers that cater to the industry, sparking a sharp run-up in market valuations for majors such as Nvidia. Contract chipmaker TSMC has also been a major beneficiary of this trend.