Why Nvidia stock is rebounding another 2% on Friday

Nvidia stock NVDA rose on Friday after Amazon reaffirmed its commitment to the chipmaker's artificial intelligence processors and increased its capital spending plans, reinforcing investor confidence in continued demand for AI infrastructure.

The stock gained 2.6% to $199.07 in midday trading, building on Thursday's more than 2% advance.

The rally put Nvidia on track to reclaim its position as the world's most valuable listed company from Apple, whose shares tumbled following its latest earnings report.

Amazon reinforces Nvidia partnership

Amazon provided another boost to sentiment after raising its full-year capital expenditure forecast to $220 billion from $200 billion, underscoring its continued investment in AI infrastructure.

Chief Executive Andy Jassy also reiterated Amazon Web Services' long-term commitment to Nvidia's processors despite the company's ongoing development of custom AI chips.

"We...continue to have a deep partnership with Nvidia and will continue making AWS the best place to run Nvidia chips, as we have customers who will run on Nvidia for as long as we can foresee," Jassy said during the company's earnings call.

His comments helped ease concerns that Amazon's Trainium processors could rapidly displace Nvidia's products across AWS.

At the same time, Jassy acknowledged that Amazon is exploring additional ways to commercialize its in-house chips.

"We do have an increasing number of customers who are interested in us providing the training and chips to them separate from our cloud," he said.

"We're actively having those conversations and exploring. And I expect there's a real chance we'll do that in the future."

While Amazon continues expanding its custom silicon strategy, its comments suggested Nvidia's graphics processors are expected to remain central to AWS's AI offerings for the foreseeable future.

Stock rebounds after recent pressure

Friday's gains extended Nvidia's recovery after several weeks of pressure driven by concerns over AI spending, financing arrangements, and rising competition in the semiconductor industry.

Investor sentiment had also weakened following reports that a Chinese company had begun mass-producing key chipmaking equipment, raising questions about the competitive landscape.

Separately, The Wall Street Journal reported that Nvidia is discussing a roughly $250 billion financing guarantee to support OpenAI's lease of a large data centre project in Ohio.

The proposed arrangement would help OpenAI secure more favourable financing while supporting long-term demand for Nvidia's AI processors.

However, the report also prompted concerns among some investors that financing agreements between Nvidia and its customers resemble the circular financing structures seen during the dotcom era.

Burry expands bearish bets

Investor skepticism over AI valuations has also been highlighted by Michael Burry, the investor best known for predicting the US housing market collapse.

Burry expanded his bearish positions across the semiconductor sector, increasing his put options tied to Nvidia while also adding to short positions linked to Micron Technology, the iShares Semiconductor ETF, and the Invesco QQQ Trust.

In recent posts on X, he has argued that Nvidia's long-term revenue outlook is becoming increasingly dependent on financing arrangements and recently said the company's five-year credit default swaps were going "parabolic" because of what he described as "circular spending to biblical proportions."