Wall Street analysts are not omniscient, but their insight is valuable because they have more resources than retail investors. The fact that analysts have become more optimistic ahead of Nvidia’s third-quarter report is a good sign. It suggests very thorough research has uncovered signs of strong demand. That could drive the stock higher after Nov. 20.

Nvidia counts all of the largest hyperscale cloud computing companies among its customers. That includes Alphabet, Amazon, Meta Platforms, and Microsoft. Those companies have not only invested aggressively in AI infrastructure throughout 2024, but also expect capital expenditures to increase next year.

• Alphabet’s capital expenditures totaled $13 billion in the third quarter, most of which went to infrastructure, and management expects a similar level of spending in the fourth quarter. But CFO Anat Ashkenazi told analysts, “We do see an increase coming in 2025.”

• Amazon expects capital expenditures to total about $75 billion in 2024. But CEO Andy Jassy recently told analysts, “I suspect we’ll spend more on that in 2025.” He said most of that capital was earmarked for its cloud computing business, and he specifically mentioned generative AI as the impetus.

• Meta Platforms’ capital expenditures will total about $40 billion in 2024, most of which has been allocated to AI servers. However, CFO Susan Li told recently told analysts, “We expect a significant acceleration in infrastructure expense growth next year.”

• Microsoft’s capital expenditures totaled $20 billion in the first quarter of fiscal 2025, which ended in October 2024. CFO Amy Hood told analysts, “We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals.”

Some spending discussed above reflects strong demand for Blackwell. However, Nvidia also builds central processing units (CPUs) and networking equipment. In fact, the company has secured a leadership position in AI networking gear, according to Bloomberg. So, the uptick in capital expenditures further supports the idea that Nvidia will give encouraging guidance when it announces results for the third quarter. That could drive the stock higher after Nov. 20.

However, the more important takeaway is that Nvidia has a key competitive advantage in vertical integration. Because the company effectively designs entire data centers, Nvidia can build systems with a superior total cost of ownership, according to Jensen Huang. That should keep the company ahead of its competitors in the coming quarters and years. Indeed, Morgan Stanley analyst Joseph Moore recently wrote, “The market tends to underestimate the difficulty of competing with Nvidia.”

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Prediction: Nvidia Stock Will Soar After Nov. 20 for These 3 Simple Reasons was originally published by The Motley Fool