Why Nvidia Stock Is Rising as Crackdown on Data Centers Looms

Nvidia systems deployed by cloud-computing company CoreWeave.

Key Points

Nvidia shares rose despite the threat of tougher Democratic restrictions on data-center construction.
The defeat of Republican governors in Texas and Ohio means the artificial-intelligence infrastructure buildout will face greater scrutiny.
Advanced Micro Devices reported that its sales of data-center chips nearly doubled from the year-earlier period to $8.5 billion.

Nvidia stock was seemingly unfazed on Wednesday despite the threat of tougher restrictions on data-center construction by victorious Democrats.

Positive results from key companies in the chip sector are a reminder that Nvidia and other hardware companies aren’t immediately impacted by fears of data-center delays. Customers are rushing to stock up on artificial-intelligence hardware even despite the uncertainty of whether they will have somewhere to install it.

Nvidia shares were up 1.4% at $209.58 in premarket trading. The stock is down 13% over the past month.

The defeat of Republican governors in Texas and Ohio means the AI infrastructure buildout is set to face greater scrutiny. But that’s more of an issue for Nvidia’s customers such as Elon Musk’s SpaceX or CoreWeave than it is for the chip company itself—after all, so long as Nvidia can sell the processors, it doesn’t mind if in the short-term they are left in warehouses.

“Greater congressional oversight will not necessarily derail the AI investment cycle. Broad federal restrictions would face legislative and presidential constraints, while state and local rules remain more important for data-center timing and location,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management in a research note.

Meanwhile, results from Advanced Micro Devices on Tuesday showed plenty of demand for AI hardware. AMD’s Sales of data-center chips nearly doubled from the year-earlier period to $8.5 billion, beating projections of 80% growth. AMD shares were gaining 6.2% in the premarket.

Server maker Super Micro Computer added to the positivity with a strong earnings beat in its own report, pushing shares up more than 9%. Super Micro recently began shipping Nvidia’s Vera Rubin NVL72 racks, its latest AI servers.

Nvidia will face bigger challenges ahead if Democrat politicians do make a serious push to slow AI data centers. But for now, the market is more interested in signs of healthy appetite for chips after a poor run for the stock.

Write to Adam Clark at adam.clark@barrons.com

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