Big tech companies are pouring more money into artificial intelligence (AI) data centers to stay ahead of the competition. Meta Platforms, led by CEO Mark Zuckerberg, plans to spend between $60 billion and $65 billion on capital expenditures in 2025, a 60% increase from last year’s estimate.
This surge in spending is driven by the growing demand for large language model training and inference, which requires powerful GPUs and efficient network switches. Nvidia, Broadcom, and Arista Networks are expected to benefit from this increased spending, with their stocks likely to see strong revenue growth in 2025.
Meta designs its own silicon chips, working closely with Broadcom, to handle specific AI-related tasks. These custom-built chips are faster and more power-efficient than general-purpose GPUs. The company plans to expand the scope of these chips to include generative AI, which will provide a boost to Broadcom’s business.
Arista Networks partners with Meta to create hardware and software solutions for its data centers. With plans to open a massive data center in 2025, Arista is expected to see strong orders from Meta.
However, investors should be cautious when considering these stocks due to their high valuations. While the increased demand for AI infrastructure is a positive sign, it also raises questions about how long big tech companies will sustain their spending on hardware before focusing on software efficiency.
Nvidia’s stock looks attractive based on forward earnings estimates, but its declining market share and pricing power are long-term challenges. Broadcom has upside potential as a designer of custom AI accelerators, but trades for a higher forward earnings multiple than Nvidia. Arista Networks’ strong revenue growth is not justified by its current stock price.
Overall, the increased spending on AI data centers is a positive sign for these stocks in 2025, but investors should be mindful of the risks and uncertainties associated with each company’s business model.
Source: https://www.fool.com/investing/2025/02/01/meta-ceo-mark-zuckerberg-nvidia-broadcom-arista