Why Is Nvidia's Stock Rising Amid Meta's Expected Cost Increase?

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Meta Platforms, the parent company of Facebook, quietly smiles as it announced on the 26th (local time) that it will increase costs to expand investments through next year along with its earnings report, benefiting U.S. semiconductor company Nvidia.

After the market closed, Nvidia's stock price rose more than 4% in after-hours trading following Meta's earnings announcement. Bloomberg reported that Meta's plan to further expand infrastructure-related investments next year to enhance users' digital experiences is a positive factor for Nvidia, which supplies data centers, causing its stock price to rise.

In its earnings report, Meta expects total expenses this year to be between $85 billion and $87 billion (approximately 120.7 trillion to 123.5 trillion KRW). It forecasts that this amount will increase to $96 billion to $101 billion next year. Capital expenditure, including financial costs, is estimated to be $30 billion to $34 billion this year and $34 billion to $39 billion next year.

Besides Nvidia, U.S. semiconductor company Marvell Technology's stock price also jumped nearly 3% in after-hours trading. This company is a fabless semiconductor firm providing semiconductor solutions optimized for cloud environments. Arista Networks, which manufactures networking gear used in data centers and counts Meta as a major customer, saw its stock price rise more than 7% in after-hours trading.

Aaron Rakers, an analyst at Wells Fargo, stated in a report released that day, "Concerns had grown that Meta would significantly reduce capital expenditures based on its Q3 results, but tonight we saw exactly the opposite."

While suppliers of products and services to Meta smiled, the market appears to view Meta's increased spending negatively. Following the announcement of earnings showing two consecutive quarters of revenue decline and a Q4 revenue forecast below market expectations, Meta's stock price plummeted nearly 19%.

This content was produced with the assistance of AI translation services.