When Nvidia Corp (NASDAQ:NVDA, ETR:NVD) pledged up to $100 billion to back OpenAI this week, investors were quick to question whether the artificial intelligence (AI) boom had crossed into bubble territory.
Wedbush Securities takes the opposite view: this is only the next stage of an “AI revolution,” not the end of it.
In a note published Wednesday, Wedbush analysts led by Daniel Ives argued that the latest tie-up between Nvidia and OpenAI is “a watershed moment” that underscores how much capital will be poured into AI infrastructure over the coming years.
OpenAI’s plans include building out systems requiring roughly 10 gigawatts of power and millions of Nvidia graphics processors, more than double last year’s shipments.
According to Wedbush, the arrangement gives OpenAI access to cheaper capital while cementing Nvidia’s role at the centre of the AI buildout.
The brokerage likens the moment to 1996, when the internet’s commercial potential was just being recognised, rather than 1999, when the dot-com bubble burst.
“This is just the next step in this tech buildout that will result in trillions being spent,” the analysts wrote, stressing that fears over valuation are misplaced in the face of structural growth.
So far, the heavy lifting has come from US technology giants. Microsoft, Amazon and Google alone are set to spend around $350 billion on capital expenditure this year, Wedbush said, with governments and enterprises now joining the race.
The Middle East, particularly Saudi Arabia and the United Arab Emirates, is investing heavily in AI-driven data centres, while the UK has recently announced its own wave of initiatives.
Wedbush believes this second phase will also create opportunities for software groups like Palantir, which it views as a future trillion-dollar company. “Healthy pullbacks will happen,” the analysts said, “but names like Palantir will further grow into their valuations.”
To sceptics warning of overheating, Wedbush counters that those who only watch price-to-earnings ratios risk missing another generational shift.
The firm notes that past waves of transformational technology, from smartphones to cloud computing, looked expensive on traditional metrics before scaling globally.
The takeaway is that AI’s centre of gravity is broadening beyond Nvidia and the hyperscalers.
As Wedbush put it, the coming months will be defined by “the second, third and fourth derivatives” of AI adoption spreading across industries and geographies