Microsoft's chief financial officer said data-center capital spending will keep rising in fiscal 2027, citing "demand signals across our portfolio." The comment points to continued chip orders for Nvidia, even as the chipmaker's stock trades at the same valuation as the broader market and Wall Street projects 42% revenue growth for fiscal 2028.
Microsoft reported fourth-quarter results for fiscal 2026 on July 29, and chief financial officer Amy Hood said data-center capital expenditure will grow year over year in fiscal 2027. Hood attributed the increase to "demand signals across our portfolio." Motley Fool's analysis suggests that reflects insufficient computing capacity to meet current client demand.
That statement cuts against a broader market doubt: many investors believe AI hyperscalers are overspending on data centers and will end up with computing capacity they don't need for years. Hyperscalers themselves reject that view and keep ramping up capex regardless, and Microsoft's latest guidance is the newest example of that pattern.
Indeed, AI hyperscalers such as Microsoft are huge clients that buy billions of dollars' worth of computing equipment from Nvidia. As Microsoft ramps up its capex plans, Nvidia is expected to be one of the primary beneficiaries.
Nvidia's own projection points to $1 trillion or more in data center capex from AI hyperscalers in 2027. That would be up from an estimated $650 billion in 2026.
Despite that backdrop, Nvidia now trades at 21.1 times forward earnings, the same multiple as the S&P 500. That multiple implies the market expects Nvidia's growth to cool to the index average after this year.
Yet Wall Street analysts project 42% revenue growth for Nvidia in fiscal 2028, which ends in January 2028. That is well above what a market-average multiple usually reflects.
Nvidia's next scheduled catalyst is its second-quarter earnings report on Aug. 26, which will show whether hyperscaler capex plans like Microsoft's are translating into higher chip sales.
Source: Motley Fool
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