NVIDIA – The biggest winner of the "Inflation Reduction Act"?

Earlier this month, NVIDIA became the world's first company with a market value exceeding $4 trillion, and it may receive unexpected support from the "Big Beautiful Act" recently signed by President Trump.

According to reports, the "Big Beautiful Act," signed earlier this month, allows companies to immediately write off capital investments instead of amortizing them over several years. This change in tax policy could prompt tech giants to significantly increase their spending on NVIDIA chips and other AI infrastructure.

Morgan Stanley estimates that the act and related depreciation policy changes will increase the combined free cash flow of Amazon, Alphabet, and Meta by nearly $49.5 billion in 2025 and by about $29.2 billion in 2026. Analysts expect these tech giants to invest the saved funds into infrastructure development to meet the strong demand for artificial intelligence and cloud computing.

Less than a month after the act was passed, signs of accelerated AI investment have already emerged. Last week, Alphabet raised its full-year capital expenditure forecast by $10 billion, an increase of about 13%, citing the need to increase AI investment to meet rapidly growing demand. As the absolute leader in the AI chip market, NVIDIA is expected to be the biggest beneficiary of this investment boom.

Tax Reform Benefits Release Cash Flow for Tech Giants

The tax changes brought by the "Big Beautiful Act," signed by President Trump on July 4, may become an important catalyst for tech giants to increase their spending on NVIDIA chips and other AI infrastructure. Morgan Stanley analyst Brian Nowak stated in a recent research report:

"We believe these tax incentives may be aimed at encouraging leading U.S. tech companies to make more aggressive investments in generative AI to ensure that the U.S. maintains its competitive edge in the global generative AI race."

Analysis indicates that the impact of this change will be significant. The ability to immediately write off AI investments will not only incentivize tech giants to increase investments to enhance computing power but also help them save on tax costs.

Early signs of accelerated AI investment have already appeared in the market. As the first of the four major cloud service providers to release its second-quarter financial report, Alphabet raised its capital expenditure forecast by $10 billion, demonstrating strong demand for AI infrastructure investment.

Morgan Stanley analyst Joseph Moore believes this indicates that "GPU demand has not yet peaked in 2025."

Meanwhile, according to a previous article by Jianwen, Microsoft's total capital expenditure of $24.2 billion in the fourth quarter of fiscal year 2025 set a record for the highest quarterly total. Meta also raised the lower limit of its capital expenditure for 2025 from $64 billion to $66 billion Analysis indicates that this AI spending growth model is expected to be replicated among other tech giants. The ability to fully deduct AI investment costs in the year of investment will simultaneously achieve the dual effect of increasing computing power and saving taxes, providing companies with a stronger investment incentive.

Driven by the new tax policy, tech giants will continue to expand the scale of data center construction using the increased free cash flow to alleviate the current supply-demand imbalance in AI services.

NVIDIA's Market Dominance Expected to Strengthen

As the biggest beneficiary of the AI investment boom, NVIDIA has seen its quarterly revenue grow more than fourfold over the past two years, reaching a record $44 billion in the first quarter of the current fiscal year.

NVIDIA chips are one of the largest expenditure items for tech giants building data centers, and the company's market share in the rapidly growing market is expected to further expand.

Bank of America predicts that by 2030, AI accelerators will account for over 65% of all data center spending, up from about 38% in 2024. During this period, NVIDIA is expected to maintain approximately 80% market share.

This means that as the cash flow released by the "Inflation Reduction Act" drives tech giants to increase AI investments, NVIDIA will receive a large portion of those orders, further solidifying its dominance in the AI chip market