Nvidia to Acquire Hugging Face for $14 Billion Amid Rising AI Data Center Spending

Key Insights

• Nvidia stock has held steady in the past few days.
• The company is about to buy Hugging Face.
• PWC data shows that AI data center spending will continue rising.

Nvidia stock held steady on Wednesday, reaching a high of $219 as investors reacted to the potential Hugging Face purchase and the rising optimism that data centers spending will accelerate in the coming years. NVDA was trading at $219, down by nearly 5% from its highest point last week.

NVDA stock is on edge as the company plans to buy Hugging Face, a popular company in the AI space. According to Bloomberg, it plans to spend $14 billion for the deal, which will make it one of its biggest acquisitions ever. In addition, the company may announce a separate $1 billion deal for its employees.

Jensen Huang, Nvidia’s CEO, plans to use the buyout to grow its market share in the artificial intelligence industry. As part of the process, he plans to foster open source models, which have become highly popular this year.

A $14 billion acquisition would be a big jump from its last funding round, which valued it at $4.5 billion three years ago. Other companies that have invested in Hugging Face include Google, Amazon, Intel, and Salesforce.

Nvidia has used its large balance sheet to invest substantial sums of money in the AI industry. This week, it invested $3.5 billion in MediaTek, a top company that makes products in areas like smartphones, smart home, data center, and automotive.

It has also become the biggest shareholder in CoreWeave, a former Bitcoin mining company that has become the biggest neocloud company with a revenue backlog of $104 billion. It is also the ninth-biggest holder of SpaceX shares.

It has also invested substantial sums of money in companies like Nebius, Lumentum, Intel, Coherent, OpenAI, and Anthropic. These investments have fueled concerns of circular investments.

Nvidia stock will also react to the ongoing optimism about artificial intelligence spending. A report released by PWC today showed that AI data center spending will reach over $31.6 trillion by 2050. This spending will dwarf projects like railways, the internet, and electrification.

Most notably, the report said that the bulk of this spending will go to hardware companies like Nvidia and AMD.

The report noted that the ongoing backlash that has led to the stoppage of 75 data center projects worth $130 billion will not have a major impact on the business.

Last week’s performance showed just how fast the company is growing. Its revenue jumped by over 100% in the second quarter, and management predicts revenue will grow by 77% next year.

The challenge, however, is that the GPU industry is getting more competitive, with this competition coming from its clients. A good example of this is OpenAI, which has unveiled Jalapeno, a chip it notes is better than Nvidia’s in some key metrics. Google, Microsoft, and Amazon are all working on their ASIC chips.

Technical indicators suggest that NVDA stock may be at risk of a significant drop in the foreseeable future. One of the top risks is that it has formed a rising wedge pattern, consisting of two converging trendlines. These two lines are nearing their convergence.

The other risk is that the stock has formed a bearish divergence, a common bearish reversal signal in technical analysis. This pattern occurs when key oscillators such as the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) continue to fall. Therefore, the stock may break down, potentially to $200 or below.

This article is for informational purposes only and does not constitute financial advice. Equity markets can experience sharp price movement

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